3. You estimate the Fama-French 3-factor model for IBM and obtain the following results: IBM estimate...

  

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3. You estimate the Fama-French 3-factor model for IBM and obtain the following results: IBM estimate standard error t-statistic 0.0155 0.0094 1.7 Bm 0.85 0.26 3.2 BSMB -1.04 0.35 -3.0 BHML -1.13 0.47 -2.4 (a) Which of these coefficients are significantly different from zero? Interpret the signs of BSMB and BML: Does IBM behave like a small or large stock? Value or growth stock? (b) Now assume that the expected returns on the 3 factors are ErMKT] = E[TM - ry] 5%, ErsMB] = 1%, and E(THML] = 2.5%. Based on the above factor loadings (beta) estimates, what is the expected excess return of IBM according to the Fama-French 3-factor model? 3. You estimate the Fama-French 3-factor model for IBM and obtain the following results: IBM estimate standard error t-statistic 0.0155 0.0094 1.7 Bm 0.85 0.26 3.2 BSMB -1.04 0.35 -3.0 BHML -1.13 0.47 -2.4 (a) Which of these coefficients are significantly different from zero? Interpret the signs of BSMB and BML: Does IBM behave like a small or large stock? Value or growth stock? (b) Now assume that the expected returns on the 3 factors are ErMKT] = E[TM - ry] 5%, ErsMB] = 1%, and E(THML] = 2.5%. Based on the above factor loadings (beta) estimates, what is the expected excess return of IBM according to the Fama-French 3-factor model?