Factor Analysis

question 19

Multiple Choice

Factor analysis:

• A)uses macroeconomic time-series that capture changes in productivity,interest rates and inflation to act as proxies for the factors generating security returns.
• B)is a statistical estimation technique based on the idea that the covariances between security returns provide information that can be used to determine the common factors that generate the returns.
• C)establishes the correlation between the changes in one factor and the undiversifiable risk.
• D)assumes that there is no correlation between the factors which affect the price of securities.

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Definitions:

Net Income

The total profit of a company after all expenses and taxes have been subtracted from its total revenue.

Stock Dividend

A payment to shareholders in the form of additional shares instead of cash.

Retained Earnings

Retained earnings refer to the portion of net income that is retained by the corporation rather than distributed to its shareholders as dividends.

Market Value

The current value of an asset or company based on the price that a buyer is willing to pay in the market.