Which of the Following Statements Does $\underline{not}$ Apply to the Market Model?
A)It Is a Simpler Approach

question 42

Multiple Choice

Which of the following statements does $\underline{not}$ apply to the market model?

• A)It is a simpler approach than the standard version of the capital asset pricing model.
• B)This approach is seldom used in accounting research.
• C)In this model, the risk-free return is dropped from the equation.
• D)Abnormal returns are captured in the error term of the model.

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Definitions:

Heritable Risk Factor

Any attribute, characteristic, or exposure that increases the likelihood of developing a disease or injury, which can be passed from parent to offspring through genes.

Medial Prefrontal Cortex

A part of the frontal lobe of the brain involved in decision-making, social behavior, and personality expression.

Operant Conditioning

Form of learning in which behaviors lead to consequences that either reinforce or punish the organism, leading to an increased or a decreased probability of a future response.

Observational Learning

Learning that occurs when a person observes the rewards and punishments of another’s behavior and then behaves in accordance with the same rewards and punishments.