Market Risk Premium IS a Macro Factor? (Not a Style Risk Factor!?)

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
Topic Author
NAVIK
Posts: 1
Joined: Thu Nov 26, 2020 7:59 pm

Market Risk Premium IS a Macro Factor? (Not a Style Risk Factor!?)

Post by NAVIK »

Conclusion: there are different beta measurements for each risk factor. CAPM is an old model used by TD and many other banking firms which use only one single beta to explain historic returns.

This means that beta should be different when viewing and measuring from a 3 factor or 5 factor model since it splits everything up into its own risks with its own independent betas? Correct? since there are all equated as b1, b2, b3 , bn… according to the equation below.

The other interesting thing is that the Market Risk Factor Premium isn’t included on MSCI or morningstars risk factors section for etfs, I believe the reason for this is because it relies on macroeconomics and is a macrofactor. In this case it is its own section in a way since it relies on inflation, interest rates, economic growth etc (all providing the market premium above treasury bills)… Vs the others which are company and style related.

I appreciate any disagreement, agreement or general discussion! Please respond :greedy

Image
#fama #french
User avatar
LadyGeek
Site Admin
Posts: 68494
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: Market Risk Premium IS a Macro Factor? (Not a Style Risk Factor!?)

Post by LadyGeek »

Welcome! Unfortunately, this site does not permit attachments. You will have to upload your image to a file sharing site, e.g. Google Drive, and share the link.

See: Posting images in the Bogleheads forum
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
Post Reply