Carhart Factor Model: HML

CFA Level III Portfolio Management
#1

One factor in the Carhart Factor mode for excess returnsl is HML (High book-to market portfolio return - Low book-to market portfolio return).

If the factor model shows Positive active exposure (e.g. 0.40), this suggests the manager has a VALUE tilt.

If the factor model shows Negative active exposure (e.g. -0.40), this suggests the manager has a GROWTH tilt.

I would have expected the exact opposite… High Book:market (growth) minus low Book:market (value), being positive, must mean more exposure to High Book:market (growth)…just because, math

Any idea what I am I missing? Appreciate any feedback

#2

High book-to-market is value; low book-to-market (high market-to-book) is growth.

#3

ahaha i’m an idiot. thanks

#4

I, of course, never said that. But, as it would be rude to disagree . . . .

My pleasure.