Question: In this question, we will determine the factors explaining the returns for the HiTec industry portfolio We will build a factor regression model using the

In this question, we will determine the factors explaining the returns for the HiTec industry portfolio

We will build a factor regression model using the data in the Factor_HiTec.csvLinks to an external site. file to answer the questions below.

In the file,

  • Mkt_rf: Monthly excess return on the aggregate stock market
  • SMB: Size Factor
  • HML: Value Factor
  • QMJ: Quality Factor
  • BAB: Betting against beta factor
  • Mom: Momentum factor
  • HiTec_rf: Monthly excess return on the HiTec industry portfolio

Question at position 17

17

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Question at position 17

Which factors have the highest positive and highest negative exposure on the portfolio respectively?

Which factors have the highest positive and highest negative exposure on the portfolio respectively?

Mom and SMB

HML and Mkt_rf

SMB and BAB

Mkt_rf and HML

BAB and QMJ

Question at position 18

18

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Question at position 18

Given a significance level of 0.001, which factor could be removed from this model if we have to limit the number of features less than 6?

Given a significance level of 0.001, which factor could be removed from this model if we have to limit the number of features less than 6?

QMJ

SMB

HML

BAB

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