CFA Practice Question

There are 57 practice questions for this study session.

CFA Practice Question

In the Fama-French model, the SMB factor represents the mean return from:

A. shorting the large-cap shares and investing the proceeds in small-cap shares.
B. shorting the small-cap shares and investing the proceeds in large-cap shares.
C. investing 50% in small-cap shares and another 50% in small-cap shares.
Correct Answer: A

Each of the factors can be seen as the mean return to a zero-net investment, long-short portfolio.

User Contributed Comments 5

User Comment
Offboard could smb explain the answer to me?
arudkov i was thinking SMB is extra return on small-cap shares compared with index or chips.
cfaajay Fama-French model says that small cap will give higher return then large cap ,so short sell large cap and invest in small cap ,and earn the profit...
shajidubai Small -(minus) Big implies short big and long small
Roy1 Nice one!
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