Multifactor Models, Such as the One Constructed by Chen, Roll

question 4

Multiple Choice

Multifactor models, such as the one constructed by Chen, Roll, and Ross, can better describe assets' returns by

• A) expanding beyond one factor to represent sources of systematic risk.
• B) using variables that are easier to forecast ex ante.
• C) calculating beta coefficients by an alternative method.
• D) using only stocks with relatively stable returns.
• E) ignoring firm-specific risk.

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Definitions:

Bright Sunlight

Intense and direct sunlight, characterized by high levels of brightness and often associated with clear weather conditions.

Soil Nutrients

Essential elements or compounds in the soil that support the growth and development of plants.

Rain Forest

Dense forests typically found in tropical regions, with high levels of biodiversity and rainfall.

Primary Limiting Factor

An environmental condition that most significantly restricts the growth, abundance, or distribution of an organism or a population.