Empirical Studies Suggest Four Possible Economic Factors for the APT

question 33

Multiple Choice

Empirical studies suggest four possible economic factors for the APT. Which of the below include these economic factors?

• A) 1. Unanticipated changes in industrial production.
• 2. Unanticipated changes in the spread between the yield on low-grade and high-grade bonds.
• 3. Unanticipated changes in interest rates and the shape of the yield curve.
• 4. Unanticipated changes in inflation. It is interesting to note that one study expands that list to five factors, some similar to the previous group and some new.
• B) 1. Unanticipated changes in industrial production.
• 2. Unanticipated changes in the spread between the yield on low-grade and high-grade bonds.
• 3. Unanticipated changes in interest rates and the shape of the yield curve.
• 4. Unanticipated changes in inflation. It is interesting to note that one study expands that list to five factors, some similar to the previous group and some new.
• C) 1. The business cycle, as measured by the Index of Industrial Production.
• 2. Interest rates, as given by the yields on long-term government bonds.
• 3. Unanticipated changes in industrial production.
• 4. Short-term inflation, as measured by month-to-month changes in the Consumer Price Index.
• D) 1 . The business cycle, as measured by the Index of Industrial Production.
• 2. Interest rates, as given by the yields on long-term government bonds.
• 3. Unanticipated changes in industrial production.
• 4. Unanticipated changes in industrial production.

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Definitions:

Conditioned Stimulus

A previously neutral stimulus that, after becoming associated with an unconditioned stimulus, eventually comes to trigger a conditioned response.

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Classical Conditioning

An educational process where two stimuli are consistently coupled together; a reaction initially provoked by the second stimulus is ultimately triggered by just the first stimulus.