Question: Q1. Consider a two-factor model, with factors E and F. A factor portfolio (i.e., a factor mimicking portfolio)for factor E has the following properties (select

Q1. Consider a two-factor model, with factors E and F. A factor portfolio (i.e., a factor mimicking portfolio)for factor E has the following properties(select all that you think are correct):

it has a beta of one on E

it has a beta of zero on E

it has a beta of one on F

it has a beta of zero on F

it is well-diversified

it is not necessarily well diversified

Q2. Which of the following factors were used by Fama and French in their multi-factor model?

Return on the market index

Return spread between small and big stocks

Return spread between high book-to-market stocks and low book-to-market stocks.

All of the above factors were included in their model.

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