An "Educated Guess" as to What Causes an Observed Phenomenon

question 12

Multiple Choice

An "educated guess" as to what causes an observed phenomenon is known as a:

• A)theory
• B)hypothesis
• C)control

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Definitions:

Excess Returns

Returns on an investment that exceed the benchmark or risk-free return, indicating the extra value gained by taking on risk.

Index Model

A financial model that describes the return of a stock as a function of the return of a market index, plus residual factors unique to that stock.

Standard Deviation

A statistical measure of the dispersion or variability around the mean of a set of data points, often used to quantify the risk of an investment.

Return

The gain or loss on an investment over a specified period, expressed as a percentage of the investment’s cost.