- CFA Exams
- CFA Level I Exam
- Topic 5. Equity Valuation
- Learning Module 21. Return Concepts
- Subject 4. The Required Return on Equity - Other Models
CFA Practice Question
Which statement is false regarding the Fama-French model?
A. The coefficients Bs and Bv can take negative and positive values.
B. A portfolio of big caps will likely to have a negative Bs coefficient.
C. A portfolio of value stocks will likely to have a positive Bs coefficient.
Explanation: It will likely to have a positive Bv coefficient, not Bs coefficient.
User Contributed Comments 11
| User | Comment |
|---|---|
| MattNYC | Be careful of the deonomination of the question. I got it wrong because I wasn't looking at the coeffecient. Likely the CFA won't ask that but I guess I should be aware. |
| max81 | could somebody please explain this ? |
| REITboy | Notes say Bs = 1 is small cap, while Bs = 0 is large cap. What's Bs < 0? MegaMegaCap? Jeez... |
| bodduna | Bs = Bull Sh**. Alright analystnotes you got me. Man, that hurts. I was assuming along it was Bv. I just took it for granted. I even cheated on this question. referred book too.Man that hurts. |
| Paulvw | Bs is with respect to representative portfolios of small & large cap shares, and Bv with respect to portfolios of high P/B and low P/B shares. This means that Bs and Bv can stray above 1 and below 0, since some individual shares will always be outliers to the portfolios. |
| shiva5555 | What are Bs and Bv? |
| somk | i dont think thos Bees can take negative values. why things that have "french" in them tend to be ambiguous and confusing? |
| BeMy | Hi ! I am French |
| thebkr777 | and I'm Fama! |
| warnggg | I'm Asness! |
| aruffo | Bs and Bv = size and value |