Page 177



Step 8: Riskese

The Market Risk Factor The first risk factor in the Fama/French Five-Factor Model is the “market risk factor� or the amount of an investor’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

Index Funds: The 12-Step Recovery Program for Active Investors  

This book reveals the potential land mines and pitfalls of active investing and educates readers on the benefits of passive investing with i...

Read more
Read more
Similar to
Popular now
Just for you