If Performance Tests Are So Sensible and Efficient,shouldn't They Be

question 35

Essay

If performance tests are so sensible and efficient,shouldn't they be used in all selection situations? Why or why not?

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Definitions:

APT

The Arbitrage Pricing Theory, an asset pricing model that predicts a security's returns using the linear relationship of its expected return with macroeconomic factors.

Developed

Refers to countries or regions with advanced economic systems, typically characterized by high gross domestic product (GDP) and well-developed infrastructure.

Arbitrage Opportunity

The chance to buy an asset at a low price in one market and simultaneously sell it at a higher price in another market to profit from the price difference.

Risk-Free Rate

The estimated rate of profit from an investment void of risk, usually showcased by the return on government securities.