To determine: The risk premium, the annual risk premium, and the annual risk premium using CAPM of GE stock.
Introduction: CAPM is abbreviated as
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- An analyst has modeled the stock of a company using the Fama-French three-factor model. The market return is 10%, the return on the SMB portfolio (rSMB) is 3.2%, and the return on the HML portfolio (rHML) is 4.8%. If ai = 0, bi = 1.2, ci = 20.4, and di = 1.3, what is the stock’s predicted return?arrow_forwardAn analyst gathered daily stock returns for Feburary 1 through March 31, calculated the Fama-French factors for each day in the sample (SMBt and HMLt), and estimated the Fama-French regression model shown in Equation 6-21. The estimated coefficients were ai = 0, bi = 1.2, ci = 0.4, and di = 1.3. On April 1, the market return was 10%, the return on the SMB portfolio (rSMB) was 3.2%, and the return on the HML portfolio (rHML) was 4.8%. Using the estimated model, what was the stocks predicted return for April 1?arrow_forwardThe following table reports the percentage of stocks in a portfolio for nine quarters: a. Construct a time series plot. What type of pattern exists in the data? b. Use trial and error to find a value of the exponential smoothing coefficient that results in a relatively small MSE. c. Using the exponential smoothing model you developed in part (b), what is the forecast of the percentage of stocks in a typical portfolio for the second quarter of year 3?arrow_forward
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