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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