Factor Model Relationships Are Built on the Following Critical Assumptions

question 23

Multiple Choice

Factor model relationships are built on the following critical assumptions EXCEPT

• A) the random error term and factor are serially correlated in time-series approaches
• B) the outcome of the factor has not bearing on the outcome of the random error term
• C) the random error terms of any two securities are uncorrelated
• D) the outcome of the random error term of one security has no bearing on the outcome of the random error term of the other

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Definitions:

Welfare State

A social system in which the government assumes primary responsibility for the welfare of its citizens by providing services such as healthcare, education, and financial support.

Public Works Administration

A New Deal agency in the United States (1933-1944) created to provide public infrastructure jobs in the wake of the Great Depression.

Filipino Repatriation Act

Legislation passed in the United States in 1935, encouraging Filipinos living in the U.S. to return to the Philippines by offering free transportation.

Filipinos

The people native to or citizens of the Philippines, an archipelagic country in Southeast Asia.