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

question 25

Multiple Choice

In the one factor (APT) model, the characteristic line to estimate $\beta$ 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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