Only
a good understanding of the long-term historical
risk and return of various indexes will enable
you to know how to allocate indexes in accordance
with your own unique Risk Capacity™. In
this Step we provide you data on the risk and
return characteristics of both size and value
subsets of markets around the world. For some
indexes, we have data going back to 1926.
Step 9 : Program Overview
Three
risk factors documented by Eugene Fama,
Kenneth French, and Jim Davis. They identified
the 77 year historical annual average returns
of these risk factors. These factors are
used in a multiple regression analysis to
risk adjust returns of other investments
and to establish the cost of capital of
firms who sell their stock. Remember that
a firm's cost of capital is equal to the
investor's expected return.
