Step 8: Riskese
The Market Risk Factor The first risk factor in the Fama/French Five-Factor Model is the â€œmarket risk factorâ€? or the amount of an investorâ€™s exposure to the overall stock market compared to risk-free investments, such as the 30-day T-Bill. Investors take on market risk through all their different equity investments. Figure 8-7 plots the risk and return associated with the market risk factor for five allocations of the total U.S. stock market and U.S. Treasury bills. The highest market exposure, labeled 5, carries 100% exposure to the total U.S. market. The button labeled 0 is invested in 100% T-Bills. The chart reflects the differences in growth of $1 and annualized returns in the various market exposures over the 86-year period from January 1, 1928 through December 31, 2013. Figure 8-7
Published on Jun 1, 2015
This book reveals the potential land mines and pitfalls of active investing and educates readers on the benefits of passive investing with i...