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Question 48 Based on the size and value effects, what are the more...

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Finance

Question 48

  1. Based on the size and value effects, what are the more likely views of an recession, which on average happens once every 10 year.

    I: The recession year is given a weight of 1/10 in evaluating the importance of the risk of each year, when market participants price assets

    II: Recession year might be more important than a normal year in investors' mind

    III: CAPM beta can already precisely capture the recession risk of individual stocks. So there is no need for singling out recession risk when evaluating asset value.

    IV: Recession risk can be at least partly captured by the size beta or value beta in the Fama-French three-factor model

    I, II, III

    II, III

    II, III, IV

    II, IV

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