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

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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 β\beta what do these represent and how do they relate to the actual return?


Definitions:

Projection

A defense mechanism where one attributes their own unacceptable thoughts, feelings, or motivations to someone else.

Halo Effect

A cognitive bias where the perception of one positive trait in an individual or thing influences the overall perception of that entity as favorable.

Attribution Theory

The study of the process by which people ascribe causes to the behaviors they perceive.

Inner Qualities

Refers to inherent traits, characteristics, or virtues that form an individual's core personality and values.

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