Uni Final > Fama Decomposition > Flashcards

Fama Decomposition Flashcards

(10 cards)

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1
Q

Total return

A

Risk free rate + overall performance

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2
Q

Return from risk (r2 - r)

A

Managers risk + Investors risk

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3
Q

Return from selectivity (rp - r)

A

Diversification + net selectivity

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4
Q

Investors risk

A

r1 - r

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5
Q

Managers risk

A

r2 - r1

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6
Q

Diversification

A

r3 - r2

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7
Q

Net selectivity

A

rp - r3

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8
Q

r2

A

Using beta for weightings of market returns and wight of risk free rate

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9
Q

r1

A

clients target beta to use as weightings of market portfolio and risk free rate

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10
Q

r3

A

Calculate overall beta using STD of portfolio/STD of market
use beta as weightings for market returns and risk free rate

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