Consider the Following List of Risk Factors: (1)

question 39

Multiple Choice

Consider the following list of risk factors: (1)
Monthly growth in industrial production
(2)
Return on high book to market value portfolio minus return on low book to market value portfolio
(3)
Change in inflation
(4)
Excess return on stock market portfolio
(5)
Return on small cap portfolio minus return on big cap portfolio
(6)
Unanticipated change in bond credit spread
Which of the following factors would you use to develop a microeconomic-based risk factor model?

• A)(1), (2), and (3).
• B)(1), (3), and (5).
• C)(2), (4), and (5).
• D)(1), (3), and (6).
• E)(4), (5), and (6).

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Definitions:

Simple Linear Regression Equation

The simple linear regression equation describes the relationship between two variables by fitting a straight line through the data points that minimizes the sum of the squared differences between observed and predicted values.

Point Estimate

A single value that serves as an estimate of a population parameter.

Regression Analysis

A statistical method for estimating the relationships among variables, including a dependent variable and one or more independent variables.

Least Squares Line

A straight line that minimizes the sum of the squared differences between observed values and the values predicted by the line.