Dhrymes, Friend, and Gultekin, in Their Study of the APT

question 105

Multiple Choice

Dhrymes, Friend, and Gultekin, in their study of the APT, found that

• A) as the number of securities used to form portfolios increased, the number of factors that characterized the return generating process decreased.
• B) as the number of securities used to form portfolios increased, the number of factors that characterized the return generating process increased.
• C) as the number of securities used to form portfolios decreased, the number of factors that characterized the return generating process increased.
• D) as the number of securities used to form portfolios increased, the number of factors that characterized the return generating process remained unchanged.
• E) None of these are correct.

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Definitions:

LIFO

Last In, First Out, an inventory valuation method where the last items placed in inventory are the first ones sold.

Link-Chain Method

A statistical method used for adjusting economic or financial time series data for the effects of inflation or other external factors to show real changes over time.

Dollar-Value LIFO

Dollar-value LIFO (Last In, First Out) is an accounting method used for inventory that measures the cost of inventory in dollar terms, adjusting for inflation.