In the Factor-Analytic Approach to Estimating Factor Models, Factor Analysis

question 49

Multiple Choice

In the factor-analytic approach to estimating factor models, factor analysis will identify factors but unfortunately they will be

• A) based on the model builder's intuition rather than scientific testing of historical returns and sensitivities
• B) based on the structure of the return data which is statistically unstable
• C) unspecified beforehand as to what economic variables the factors represent
• D) tempered with the judgment of the model builder to account for the static nature of the investment environment

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Definitions:

Thermal Overload

Thermal overload is a condition where a device or circuit experiences excessive heat due to overcurrent, potentially leading to damage or failure.

Electro-magnet

A magnet created by the flow of electrical current through a coil of wire, allowing for magnetic force to be turned on or off.

Circuit Input

The point at which a signal or power enters an electronic or electrical circuit.

Control Coil

An electromagnetic coil used in electrical relays and contactors that, when energized, creates a magnetic field to open or close contacts within the device.