Which of the Following Is True of Chow Test

question 14

Multiple Choice

Which of the following is true of Chow test?

• A)It is a type of t test.
• B)It is a type of sign test.
• C)It is only valid under homoskedasticty.
• D)It is only valid under heteroskedasticity.

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Definitions:

CAPM

The Capital Asset Pricing Model, a formula used to determine the expected return of an asset based on its beta and expected market returns, thus assessing its inherent risk and cost of capital.

Beta

A measure of a security's or portfolio's volatility, or systematic risk, in comparison to the market as a whole.

Risk-free Rate

The risk-free rate is the theoretical return on an investment with zero risk, often represented by the yield on short-term government securities.

CAPM

Capital Asset Pricing Model; a model that describes the relationship between systematic risk and expected return for assets.