44.
Jagannathan and Wang (2006) find that the CCAPM explains returns ______ the Fama-
French three-factor model and that the Fama-French three-factor model explains returns
______ the traditional CAPM.
45.
A major finding by Heaton and Lucas (2000) is that
46.
Liew and Vassalou (2000) show that returns on style portfolios (SMB and HML)
47.
Petkova and Zhang (2005) examine the relationship between beta and the market risk
premium and find
48.
Studies by Chan, Karceski, and Lakonishok (2003) and La Porta, Lakonishok, Shleifer, and
Vishny (1997) report that
49.
The Fama-French model
I) is a useful tool for benchmarking performance against a well-defined set of factors.
II) premia are determined by market irrationality.
III) premia are determined by rational risk factors.
IV) the reason for the premia is unsettled.
V) is not a useful tool for benchmarking performance against a well-defined set of factors.
50.
An extension of the Fama-French three-factor model was introduced by
51.
An extension of the Fama-French three-factor model includes a fourth factor to measure
13–65
52.
Liquidity embodies several characteristics such as
Short Answer Questions
53.
Discuss the results of the studies of John Lintner (1965) and Merton Miller and Myron
Scholes (1972) in terms of the validity of the capital asset pricing model (CAPM).
54.
Discuss Roll’s critique of the CAPM.
55.
Describe some of the ways the CAPM is applied in practice.
56.
When portfolio performance is measured, what type of benchmark may be used? Explain
what Roll meant by benchmark error.