You are evaluating two passive equity funds Vanguard Small-growth ETF (VBK) and Invesco Trust (QQQ). Both funds’ objective is to track the performance of small and growth firms. The information about the two funds are provided below. Multi-factor regression model estimates are based on monthly excess returns and shown below: VBK QQQ 0.076 0.056 Standard deviation of excess returns Residual standard deviation Multi-factor model regression 0.03 0.04 0.001 +0.974 X MRP + 0.428 X SMB -0.177 X HML +0.01 X MOM + 0.200 X BAB -0.257 x QMJ 69% 0.003 + 1.125 X MRP +0.117 XSMB -0.612 X HML -0.018 X MOM – 0.212 X BAB + 0.109 x QMJ 63% R2 Further information about factor returns (monthly frequency):
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