You Have a 3 Factor Model to Explain Returns $\beta$ What Do These Represent and How Do They Relate to What

question 5

Essay

You have a 3 factor model to explain returns. Explain what a factor represents in the context of the APT? Each factor is multiplied by a $\beta$ what do these represent and how do they relate to the actual return?

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Definitions:

Criminal Act

An action that violates the laws of a jurisdiction and is punishable by the state.

Bribery

The offering, giving, receiving, or soliciting of something of value as a means of influencing the actions of an individual holding a public or legal duty.

Building Contract

A legal agreement between a property owner and a contractor for the construction of a building, specifying terms, conditions, and scope of work.

Ontario

A province in Canada known for its natural beauty, including lakes and forests, and as the home of Canada's largest city, Toronto.