Fama-French-Carhart Factor SpecificationQuantitative Finance Level 2
If we want to estimate the expected return of a stock, the following information is collected on a monthly basis.
risk-free rate = 0.15%
risk premium = 0.86%
expected return on SMB = 0.36%
expected return on HML = 0.44%
expected return on PR 1YR = 0.962%
stock market beta = 0.88
SMB beta = 0.45
HML beta = -0.95
PR 1YR beta = 0.11
Estimate the expected return (in %) on the stock based on the Fama-French-Carhart Three-Factor Model.