1. Fama and French claimed in 1993 that which two variables do a better job than beta at explaining stock returns? A. Market Capitalization and P/E ratio B. P/E ratio and Book-to-market ratio C. Market Capitalization and Book-to-market ratio D. ROA and ROE E. Current Ratio and Quick Ratio.

2. How does the market price of an Exchange Traded Fund (ETF) compare to the ETF’s Net Asset Value (NAV)? A. The market price is exactly equal to the NAV. B. The market price can trade at the NAV or at a premium, but never a discount. C. The market price can trade at the NAV or at a discount, but never a premium. D. The market price stays within a small amount of the NAV. E. The ETF can trade at any premium or discount to its NAV because there is no possibility of arbitrage.

3. In 1993, how do Fama and French control for the fact that stocks with low share prices are likely to have low market capitalization and high book-to-market ratios? A. Fama and French do not control for the relation between market capitalization and book-tomarket. B. Fama and French estimate a linear regression of market capitalization on book-to-market and only use the residual. C. Fama and French estimate a linear regression of book-to-market on market capitalization and only use the residual. D. Fama and French estimate linear regressions of book-to-market on CAPM beta and market capitalization on CAPM beta and only use the residuals. E. Fama and French divide stocks into portfolios independently depending on market capitalization and book-to-market.