Assume that you ran a time-series regression with your projecton the Fama-French factors and found the following:
E(r ̃i)−rF=(−2%)+(1.3).XMKT+(0.1).UMD+(−1).HML + (−0.1) . SMB
What would the Fama-French-Momentum model suggest you use as thehurdle rate for this project? Recall that E(XMKT) ≈ 8.5%, E(UMD) ≈8.9%, E(HML) ≈ 4.6%, and E(SMB) ≈ 3.8%. Assume that the prevail-ing risk-free Treasury offers 3%.
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