According to the Arbitrage Pricing Theory, the Return on a Stock

question 2

Multiple Choice

According to the arbitrage pricing theory, the return on a stock

• A)is not related to the expected return on the stock
• B)depends on the stock's responsiveness to unexpected changes
• C)is reduced through the construction of diversified portfolios
• D)equals the market return if the expected rate of inflation is realized

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Definitions:

Logistic Regression

A statistical method for predicting binary outcomes by modeling the probability of a variable based on its logarithm.

Logistic Regression Model

A statistical method used for analyzing a dataset in which there are one or more independent variables that determine an outcome. The outcome is measured with a dichotomous variable (where there are only two possible outcomes).

Indicator Variable

A variable, usually binary, used to represent the presence or absence of a categorical effect in regression models.

Groceries

Consumer goods, especially food and household items, sold by a grocer.