IN THE CARHART MODEL, THE EXCESS RETURN ON THE PORTFOLIO IS EXPLAINED AS A FUNCTION OF THE PORTFOLIO’S SENSITIVITY TO A MARKET INDEX (RMRF), A MARKET CAPITALIZATION FACTOR (SMB), A BOOK-VALUE-TO-PRICE FACTOR (HML), AND A MOMENTUM FACTOR (WML)

6. - CFA 2018 LEVEL 2 PORTFORLIO QUESTION BANK R48 INTRODUCTION TO MULTIFACTOR MODELS Q BANK
CFA 2018 LEVEL 2 PORTFORLIO QUESTION BANK R48 INTRODUCTION TO MULTIFACTOR MODELS Q BANK

6. B is correct. In the Carhart model, the excess return on the portfolio is explained as a

function of the portfolio’s sensitivity to a market index (RMRF), a market capitalization

factor (SMB), a book-value-to-price factor (HML), and a momentum factor (WML). Section