Which of the Following Is Not a Step Required for a Multifactor

question 10

Multiple Choice

Which of the following is not a step required for a multifactor risk model to estimate expected return for an individual stock position?

• A) identify a set of K common risk factors
• B) estimate the risk premia for the factors
• C) estimate the sensitivities of each stock to these K factors
• D) calculate the expected returns using linear programming analysis
• E) All of these are correct.

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Definitions:

Criticism

The expression of disapproval of someone or something based on perceived faults or mistakes, or the analysis and judgment of the merits and faults of a literary or artistic work.

Electric Shock

A sudden discharge of electricity through a part of the body, which can be used therapeutically in certain psychiatric treatments but also poses risks.

Reinforcement

The process by which a stimulus or event strengthens or increases the probability of the response that it follows.

Stimulus

Any event or situation that evokes a response.