SEM Models Are Estimated So as to Minimize the Difference

question 2

True/False

SEM models are estimated so as to minimize the difference between the observed and estimated covariance matrices.

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Definitions:

M&M Proposition

The Modigliani and Miller Proposition, theories that address the impact of capital structure on a company's value and cost of capital.

Homemade Leverage

A strategy where investors adjust the amount of leverage in their own portfolios by borrowing or lending money to replicate corporate financial leverage.

Capital Structure

This term relates to the way a corporation finances its operations and growth by using different sources of funds, such as debt, equity, and hybrid securities.