Questions
Questions

BU.232.640.W5.SP25 Quiz 3

Single choice

The Fama-MacBeth method is primarily used to:

Options
A.Estimate bond yield spreads
B.Remove multicollinearity in regressions
C.Calculate Sharpe Ratios
D.Test asset pricing models across time and securities
View Explanation

View Explanation

Verified Answer
Please login to view
Step-by-Step Analysis
Question restatement: The Fama-MacBeth method is primarily used to: options provided include four statements. Option 1: 'Estimate bond yield spreads' — This is not what Fama-MacBeth is designed for. The method focuses on testing pricing models over time and across securities, not estimating bond-specific yield spreads. Option 2: 'Remove multicollinearity in regressions' — While multicollinearity is a concern in regression analysis, the Fama-MacBeth procedure is not a techn......Login to view full explanation

Log in for full answers

We've collected over 50,000 authentic exam questions and detailed explanations from around the globe. Log in now and get instant access to the answers!

Similar Questions

For a 5-factor asset pricing model, the following table represents the factor returns and the factor loadings (betas) for a company. Calculate the expected excess return (assume all returns are excess, includes the Risk-Free rate) for the company (answer in percent so 6.1% is 6.1). Factor 1 Factor 2 Factor 3 Factor 4 Factor 5 Factor Return in % 3.9 3.5 0.3 0 4.7 Factor Beta or Loading -1.6 -1.3 -0.3 -1.2 0

Which statement(s) below about CAPM versus multiple-factor APT is/are correct? I. CAPM could be viewed as a special one-factor APT II. APT provides guidance about the sources of risks III. APT does not specify the number of factors IV. APT provides guidance about the magnitude of factor risk premium in equilibrium

For a five factor asset pricing model, the following table represents the factor returns and the factor loadings (betas) for a company. Calculate the expected return for the company (answer in percent so 6.1% is 6.1). Factor 1 Factor 2 Factor 3 Factor 4 Factor 5 Factor Return in % 0.8 -1.4 -2.5 4.8 -2.9 Factor Beta or Loading -1.9 -1.3 -0.6 0 1.3

Using the Fama-French model, a firm has a Beta of HML of -0.5, Beta of SMB of -1.4, and Beta on the Market of 1.2. If the expected market risk premium is 7%, the HML return -2.2%, the risk-free rate is 3.3%, and SMB return 1.6%, what is the expected return of the firm? (Answer in % so 6.1% is 6.1 and to one decimal place).  

More Practical Tools for Students Powered by AI Study Helper

Join us and instantly unlock extensive past papers & exclusive solutions to get a head start on your studies!