Which of the Following Is not a Step Required for a Multifactor

question 31

Multiple Choice

Which of the following is not a step required for a multifactor risk model to estimate expected return for an individual stock position?

• A) Identify a set of K common risk factors.
• B) Estimate the risk premia for the factors.
• C) Estimate the sensitivities of the each stock to these K factors.
• D) Calculate the expected returns using linear programming analysis.
• E) All of the above are necessary steps for a multifactor risk model.

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Definitions:

Ambrosia

In classical mythology, the food of the gods, or in general usage, something extremely pleasing to taste or smell.

Rocks Oxidize

The chemical process where rocks react with oxygen, leading to changes in their mineral composition and often causing them to weaken or crumble.

Earth's Surface

The outermost layer of the Earth, consisting of the crust and parts of the upper mantle that interact directly with the biosphere and atmosphere.

Minerals

Naturally occurring, inorganic solids with a definite chemical composition and a crystalline structure, forming the building blocks of rocks.