- CFA Exams
- CFA Exam: Level II 2021
- Study Session 16. Portfolio Management (1)
- Reading 44. Using Multifactor Models
- Subject 2. Factors and types of multifactor models
CFA Practice Question
Consider a macroeconomic 2-factor model. If the surprises in both factors are zero, the return to stock i will be ______.
B. ai + εi
C. ai + bi1 + bi2 + εi
A. ai
B. ai + εi
C. ai + bi1 + bi2 + εi
Correct Answer: A
This is the stock's expected return.
User Contributed Comments 4
| User | Comment |
|---|---|
| nieuwed | What happened to the error term? Why isn't the answer B? |
| b25331 | we always expect the error term to be zero, i.e. mean = zero |
| ashish100 | So choice b isn't wrong eithe |
| CFAJ | truth |