Tests of Multifactor Models Indicate

question 6

Multiple Choice

Tests of multifactor models indicate

• A)the single-factor model has better explanatory power in estimating security returns.
• B)macroeconomic variables have no explanatory power in estimating security returns.
• C)it may be possible to hedge some economic factors that affect future-consumption risk with appropriate portfolios.
• D)multifactor models do not work.

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Definitions:

Activation

In psychology, the process of stimulating an action or response by using a stimulus, often related to the arousal of some physiological or psychological activity.

Sensory Adaptation

The method through which sensory receptors decrease in sensitivity to unchanging stimuli as time progresses.

Synaesthesia

A perceptual condition in which stimulation of one sensory pathway leads to automatic, involuntary experiences in a second sensory pathway.

Subliminal Perception

The operation of sensory systems in handling information without the individual's conscious recognition.