Question: Boris Excelcius developed a simple three factor model to explain the excess stock returns over the risk free rate. He will use unexpected GDP surprises,
Boris Excelcius developed a simple three factor model to explain the excess stock returns over the risk free rate. He will use unexpected GDP surprises, interest rate surprises and inflation surprises. His final model for Louis Albertson Gymnastics LAG stock has an alpha term equal to and the factor betas for growth, interest rates and inflation and The mean of the firm specific term ei If the inflation, interest rates and growth surprises are and then the expected excess return for LAG stock will be
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