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Basic Question 0 of 11
In the macroeconomic factor models, ______.
II. a one percentage point surprise in factor 1 will contribute bi1 percentage points to the return to stock i
III. the error term εi represents unsystematic risk related to firm-specific events
IV. the mean of the error term εi is zero
V. different assets have different factor sensitivities
I. the "b's" are very similar to betas in the market model
II. a one percentage point surprise in factor 1 will contribute bi1 percentage points to the return to stock i
III. the error term εi represents unsystematic risk related to firm-specific events
IV. the mean of the error term εi is zero
V. different assets have different factor sensitivities
User Contributed Comments 1
| User | Comment |
|---|---|
| alyl21 | 1) market model deals with sysmtematic risk. Macro risk factors are also systemmatic, so similar 2) easy 3) easy 4) error term should be 0 given large sample size 5) easy |
Thanks again for your wonderful site ... it definitely made the difference.
Craig Baugh
Learning Outcome Statements
explain sources of active risk and interpret tracking risk and the information ratio;
describe uses of multifactor models and interpret the output of analyses based on multifactor models;
describe the potential benefits for investors in considering multiple risk dimensions when modeling asset returns.
CFA® 2026 Level II Curriculum, Volume 5, Module 40.