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 ] +
-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 ] + 
-The term  measures the sensitivity of the securities returns to:

Quizplus · Accepted Answer

The term in question is E[R_Mkt] - r_f, which represents the sensitivity of the securities returns to the overall market. This is because it is subtracting the risk-free rate and multiplying the difference between the market return and the risk-free rate by the factor loading on the market. Therefore, the answer is D.

Use the Equation for the Question(s)below