- 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

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**CFA Practice Question**

In the macroeconomic factor models, ______.

II. a one percentage point surprise in factor 1 will contribute b

III. the error term ε

IV. the mean of the error term ε

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 b

_{i1}percentage points to the return to stock iIII. the error term ε

_{i}represents unsystematic risk related to firm-specific eventsIV. the mean of the error term ε

_{i}is zeroV. different assets have different factor sensitivities

Correct Answer: I, II, III, IV and V

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**User Contributed Comments**
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User |
Comment |
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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 |