Q748
Third factor in Fama French three factor model is ratio which is classified as
A.
book to market ratio
B.
market to book ratio
AnswerC.
company to industry ratio
D.
stock to portfolio ratio
Answer: Option B
Solution
Answer: Option B
Solution:
Third factor in Fama French three factor model is ratio which is classified as market to book ratio. The Fama and French model has three factors: size of firms, book-to-market values and excess return on the market. In other words, the three factors used are SMB (small minus big), HML (high minus low) and the portfolio's return less the risk free rate of return.