In a Portfolio of Risky Assets the Response to a Factor,F_i,can

question 3

Multiple Choice

In a portfolio of risky assets the response to a factor,F_i,can easily be determined by:

• A) summing the weighted β_i s and multiplying by the innovation in F_i.
• B) summing the F_i s.
• C) adding the average weighted expected returns.
• D) Summing the weighted random errors.

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Definitions:

Probability Distribution

A function in mathematics that offers the chances of various outcomes happening in an experiment.

Average Profit

The mean amount of profit earned, calculated by dividing the total profit by the number of units sold or the period over which the profit was earned.

Weight Gain

An increase in body weight, which can be due to muscle mass increase, fat accumulation, or other factors.

Probability Distribution

A mathematical description of the likelihood of different outcomes in an experiment, showing how probabilities are distributed over a range of values.