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Which statement about the Fama-French five factors is FALSE?

Options
A.Investment factor reflects the outperformance of high-investment firms over low-investment firms.
B.Value factor reflects the outperformance of “value stocks” (high book-to-market ratio) over “growth stocks” (low book-to-market ratio).
C.Profitability factor indicates the outperformance of high-profitability firms over low-profitability firms.
D.Market factor reflects the compensation that investors receive for taking on the additional risk associated with investing in the stock market as opposed to a risk-free asset.
E.Size factor captures the outperformance of small-cap companies over large-cap companies
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The question asks which statement about the Fama-French five factors is FALSE, so we will examine each option in turn and explain why it is or isn’t consistent with the five-factor model. Option 1: 'Investment factor reflects the outperformance of high-investment firms over low-investment firms.' In the Fama-French five-factor framework, the CMA (investment) factor captures the tendency of firms that invest conservatively (low investment) to earn ......Login to view full explanation

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