Which of the Following Statements Is True About Models That

question 13

Multiple Choice

Which of the following statements is true about models that attempt to measure the empirical performance of the CAPM?

• A) The conventional CAPM works better than the conditional CAPM with human capital.
• B) The conventional CAPM works about the same as the conditional CAPM with human capital.
• C) The conditional CAPM with human capital yields a better fit for empirical returns than the conventional CAPM.
• D) Adding firm size to the model specification dramatically improves the fit.
• E) Adding firm size to the model specification worsens the fit.

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Definitions:

Behavioral Contrast

A phenomenon where the rate of response to a stimulus changes significantly when the conditions of reinforcement for another stimulus are altered.

Higher-order Conditioning

A form of learning in which a stimulus is first made meaningful or consequential for an organism through an initial step of learning, and then that stimulus is used as a basis for learning about some new stimulus.

Disinhibition

The reduction of inhibition, leading to an increase in spontaneous and unrestrained behavior, often as an effect of alcohol or neural damage.

Sensitization

An increased reaction to a stimulus following its repeated presentation, often observed in allergic reactions or in response to drugs.