In Their Multifactor Model, Chen, Roll, and Ross Found

question 51

Multiple Choice

In their multifactor model, Chen, Roll, and Ross found

• A) that two market indexes, the equally-weighted NYSE and the value-weighted NYSE, were not significant predictors of security returns.
• B) that the value-weighted NYSE index had the incorrect sign, implying a negative market risk premium.
• C) expected changes in inflation-predicted security returns.
• D) that two market indexes, the equally-weighted NYSE and the value-weighted NYSE, were not significant predictors of security returns and that the value-weighted NYSE index had the incorrect sign, implying a negative market risk premium.
• E) All of the options are correct.

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Definitions:

Variable Costing

An accounting method that only includes variable production costs (direct labor, direct materials, and variable manufacturing overhead) in product costs, excluding fixed overhead.

Product Cost

Product cost refers to the total expenses incurred to create a product, including direct labor, materials, and allocated overhead.

Variable Costing

An accounting method that only includes variable costs (costs that change with production levels) in product costs.

Fixed Costs

Expenses that do not change regardless of the level of production or sales, such as rent, salaries, and insurance.