You investigate the annualized monthly returns on a market (S\&P 500) index fund and another...
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You investigate the annualized monthly returns on a market (S\&P 500) index fund and another smart beta fund and calculate the following statistics: A regression of the smart beta fund on the Fama-French factors yields betas of 0.6 on the market excess return, 0.2 on SMB and 0.8 on HML. The average return of the SMB factor (E[SMB]) is 4% and the average return on the HML factor is (E[HML]) 5%. The annualized riskless rate has been 3% over your sample. What is the Smart Beta Fund's Fama-French 3-factor alpha? A. 2.36% B. 3.36% C. 1.36% D. 4.36%
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