Use the equation for the question(s) below.
Consider the following factor model:
E[R s ] - r f = (E[R Mkt ] - r f ) + E[R SMB ] + E[R HML ] + E[RPR1 YR]
-The term measures the sensitivity of the securities returns to:

Question

Use the equation for the question(s) below.
Consider the following factor model:
E[R s ] - r f =  (E[R Mkt ] - r f ) +  E[R SMB ] +  E[R HML ] +  E[RPR1 YR]
-The term  measures the sensitivity of the securities returns to:

Quizplus · Accepted Answer

The term 11ea7e60_15cc_44d3_ba34_9db855db82d2_TB1624_11 represents the sensitivity of the securities returns to the overall market, which is commonly referred to as beta. This is because the term appears in the equation multiplied by the excess return of the market (the Market Portfolio). Therefore, the best choice is D, the overall market.

Use the Equation for the Question(s) Below