Videos
a.
To evaluate: The reason behind small firms having relatively high loadings on the SMB factor.
Introduction:
SMB Factor: SMB, when expanded, is small minus big. When a return on portfolio related to small stocks is earned more than the return on portfolio related to large stocks it can be termed as SMB.
HML factor: When the return on a portfolio of high book to market stocks is more than the low book to market stocks, that particular portfolio is considered as HML.
b.
To evaluate: The stock market behavior of the merged firm to differ from that of a portfolio of two previously independent firms.
Introduction:
SMB Factor: SMB, when expanded, is small minus big. When a return on portfolio related to small stocks is earned more than the return on portfolio related to large stocks it can be termed as SMB.
HML factor: When the return on a portfolio of high book to market stocks is more than the low book to market stocks, that particular portfolio is considered as HML.
c.
To evaluate: The effect on merger after market capitalization.
Introduction:
SMB Factor: SMB, when expanded, is small minus big. When a return on portfolio related to small stocks is earned more than the return on portfolio related to large stocks it can be termed as SMB.
HML factor: When the return on a portfolio of high book to market stocks is more than the low book to market stocks, that particular portfolio is considered as HML.
d.
To evaluate: The prediction of the FAMA-French model for the risk premium on the merged firm compared to the weighted average of two-component companies.
Introduction:
SMB Factor: SMB, when expanded, is small minus big. When a return on portfolio related to small stocks is earned more than the return on portfolio related to large stocks it can be termed as SMB.
HML factor: When the return on a portfolio of high book to market stocks is more than the low book to market stocks, that particular portfolio is considered as HML.
e.
To evaluate: The problems faced by the application of the FF model in case of a merger.
Introduction:
SMB Factor: SMB, when expanded, is small minus big. When a return on portfolio related to small stocks is earned more than the return on portfolio related to large stocks it can be termed as SMB.
HML factor: When the return on a portfolio of high book to market stocks is more than the low book to market stocks, that particular portfolio is considered as HML.
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Chapter 10 Solutions
INVESTMENTS(LL)W/CONNECT
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EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT