Which of the Following Is Not a Necessary Step in Resolving

question 94

Multiple Choice

Which of the following is not a necessary step in resolving the causality problem?

• A) establish that a relationship exists
• B) exclude rival causal factors
• C) elimination of all sources of error
• D) specification of the time order of relationships

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Definitions:

Risk Premiums

Additional returns expected by investors for taking on higher risk compared to a risk-free asset, to compensate for the increased uncertainty.

Multifactor Model

A financial model that evaluates securities by considering multiple economic and financial factors to explain market phenomena and/or rates of return.

Expected Return

The mean value of the probability distribution of possible returns from an investment or portfolio.

Expected Return-Beta Relationship

A concept in finance that describes the relationship between the risk of an investment and its expected return, based on the beta coefficient.