Question: Assume that you ran a time-series regression with your project on the Fama-French factors and found the following: E( r i ) r F =(2%)+(1.3).XMKT+(0.1).UMD+(1).HML

Assume that you ran a time-series regression with your project on the Fama-French factors and found the following:

E(r i)rF =(2%)+(1.3).XMKT+(0.1).UMD+(1).HML + (0.1) . SMB

What would the Fama-French-Momentum model suggest you use as the hurdle rate for this project? Recall that E(XMKT) 8.5%, E(UMD) 8.9%, E(HML) 4.6%, and E(SMB) 3.8%. Assume that the prevail- ing risk-free Treasury offers 3%.

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