You Have a 3 Factor Model to Explain Returns

question 23

Essay

You have a 3 factor model to explain returns.Explain what a factor represents in the context of the APT? Each factor is multiplied by a β what do these represent and how do they relate to the actual return?

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Definitions:

Aggressive Behavior

Actions or responses characterized by hostility or attack, whether physical, verbal, or symbolic, possibly resulting from frustration or threat.

Personal Experience

refers to events or encounters an individual personally goes through, shaping their perception and understanding of the world.

Primacy Effect

The Primacy Effect is a cognitive bias that results in a person recalling information presented at the beginning of a list better than information in the middle or end.

Phi Phenomenon

An optical illusion of perceiving a series of still images, when viewed in rapid succession, as continuous motion.