Problem 6 Consider a stock X that is traded on a Tokyo Stock Exchange (TSE). An analyst is modeling expected returns on the stock using the Fama-French-Carhart factor specification (FFC). The following table shows the estimates of the factor betas calculated by the analyst: Beta of X with Portfolio respect to Factor Portfolio Factor Mkt -0.25 SMB 0.78 HML -0.45 PRIYR 0.05 You are given the following five statements about the stock and the corporation trading this stock: (A) The corporation that is trading stock X has a market value that is less than the 50th percentile of all firms traded on the TSE. (B) The return on stock X in the prior calendar year was less than the 30th percentile of all firms traded on the TSE. (C) In the prior calendar year, stock X was not traded on the TSE. (D) The corporation that is trading stock X has a Book-to-Market ratio that is greater than the 70th percentile of all firms traded on the TSE. (E) The expected return on the market portfolio is less than the risk-free interest rate. a) Determine which of the following statements is true. Explain why. b) Provide the explanation why other statements are wrong.

A) B) C) D) E) are the statements

Problem 6 Consider a stock X that is traded on a Tokyo Stock Exchange (TSE). An analyst is modeling expected returns on the stock using the Fama-French-Carhart factor specification (FFC). The following table shows the estimates of the factor betas calculated by the analyst: Factor Beta of X with Portfolio respect to Factor Portfolio Mkt SMB HML PRIYR -0.25 0.78 -0.45 0.05 You are given the following five statements about the stock and the corporation trading this stock: (A) The corporation that is trading stock X has a market value that is less than the 50th percentile of all firms traded on the TSE. (1) The return on stock X in the prior calendar year was less than the 30th percentile of all firms traded on the TSE (C) In the prior calendar year, stock X was not traded on the TSE. (D) The corporation that is trading stock X has a Book-to-Market ratio that is greater than the 70th percentile of all firms traded on the TSE. (E) The expected return on the market portfolio is less than the risk-free interest rate: a) Determine which of the following statements is true. Explain why b) Provide the explanation why other statements are wrong Problem 6 Consider a stock X that is traded on a Tokyo Stock Exchange (TSE). An analyst is modeling expected returns on the stock using the Fama-French-Carhart factor specification (FFC). The following table shows the estimates of the factor betas calculated by the analyst: Factor Beta of X with Portfolio respect to Factor Portfolio Mkt SMB HML PRIYR -0.25 0.78 -0.45 0.05 You are given the following five statements about the stock and the corporation trading this stock: (A) The corporation that is trading stock X has a market value that is less than the 50th percentile of all firms traded on the TSE. (1) The return on stock X in the prior calendar year was less than the 30th percentile of all firms traded on the TSE (C) In the prior calendar year, stock X was not traded on the TSE. (D) The corporation that is trading stock X has a Book-to-Market ratio that is greater than the 70th percentile of all firms traded on the TSE. (E) The expected return on the market portfolio is less than the risk-free interest rate: a) Determine which of the following statements is true. Explain why b) Provide the explanation why other statements are wrong