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Multifactor Model Quiz

If arbitrage opportunities are to be ruled out, each well-diversified portfolio's expected excess return must be

Suppose you are working with two factor portfolios, Portfolio 1 and Portfolio 2. The portfolios have expected returns of 15% and 6%, respectively. Based on this information, what would be the expected return on well-diversified portfolio A, if A has a beta of 0.80 on the first factor and 0.50 on the second factor? The risk-free rate is 3%.

In a factor model, the return on a stock in a particular period will be related to

Which of the following factors did Chen, Roll and Ross not include in their multifactor model?

Which of the following factors were used by Fama and French in their multi-factor model?

Which of the following factors did Merton suggest as a likely source of uncertainty that might affect security returns?

Black argues that past risk premiums on firm-characteristic variables, such as those described by Fama and French, are problematic because ________.

Multifactor models seek to improve the performance of the single-index model by

Multifactor models such as the one constructed by Chen, Roll, and Ross, can better describe assets' returns by

A _________ portfolio is a well-diversified portfolio constructed to have a beta of 1 on one of the factors and a beta of 0 on any other factor.

Tagged as: multifactor model, multifactor model, factor
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