A Study by Chen, Roll, and Ross in 1986 Examined

question 2

Multiple Choice

A study by Chen, Roll, and Ross in 1986 examined all of the following factors in applying the Arbitrage Pricing Theory (APT) EXCEPT

• A) the return on a market value-weighted return.
• B) the monthly growth rate in U.S. industrial production.
• C) the change in the consumer price index (CPI).
• D) the expected change in the bond credit spread.
• E) the return of foreign stock indices.

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Definitions:

IRS

The Internal Revenue Service, the U.S. federal agency responsible for administering and enforcing the tax laws and collecting federal taxes.

Tax Return

A form or forms filed with a government body reporting income, expenses, and other pertinent tax information, used to calculate tax liability.

Financial Statements

Formal records of the financial activities and condition of a business, person, or other entity, typically including a balance sheet, income statement, and cash flow statement.

Plant Assets

Long-term tangible assets used in the operation of a business and not expected to be consumed or converted into cash in the short term.