In Their Multifactor Model, Chen, Roll, and Ross Found

question 34

Multiple Choice

In their multifactor model, Chen, Roll, and Ross found

• A)that two market indexes, the equally weighted NYSE and the value weighted NYSE, were not significant predictors of security returns.
• B)that the value weighted NYSE index had the incorrect sign, implying a negative market risk premium.
• C)expected changes in inflation predicted security returns.
• D)that two market indexes, the equally weighted NYSE and the value weighted NYSE, were not significant predictors of security returns and that the value weighted NYSE index had the incorrect sign, implying a negative market risk premium.
• E)All of the options.

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Definitions:

Equilibrium Quantity

The quantity of goods or services supplied and demanded at the equilibrium price, where supply equals demand.

Demand

The desire of purchasers, consumers, clients, or agents for a particular commodity, service, or other resource, combined with their capacity to purchase it.

Vertical Straight Line

In a graph, a line that runs straight up and down, indicating that the variable on the x-axis remains constant.

Quantity Supplied

The quantity of a product or service that sellers are prepared and capable of offering for sale at a certain price.