In the One Factor (APT) Model,the Characteristic Line to Estimate

question 48

Multiple Choice

In the one factor (APT) model,the characteristic line to estimate β_i passes through the origin,unlike the estimate used in the CAPM because:

• A) the relationship is between the actual return on a security and the market index.
• B) the relationship measures the change in the security return over time versus the change in the market return.
• C) the relationship measures the change in excess return on a security versus GNP.
• D) the relationship measures the change in excess return on a security versus the return on the factor about its mean of zero.
• E) Cannot be determined without actual data.

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