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MULTI-FACTOR MODEL IN INVESTMENT 1. A factor model for security returns uses consumer sentiment as one...

MULTI-FACTOR MODEL IN INVESTMENT

1. A factor model for security returns uses consumer sentiment as one of the factors. The numerical valuefor this factor used in the model for September would be

a. the value of consumer sentiment in September

b. the change in consumer sentiment from August to September

c. the expected change in consumer sentiment from August to September

d. the difference between the realized and expected values of consumer sentiment for September

2. A factor model

a. describes the differences among the expected returns of securities

b. describes the variation in security returns around their expected returns

c. both a and b

d. neither a nor b

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Answer #1

The answer to question 1 is b i.e. the change in consumer sentiment from August to September. The change should should be in the numerical value.

The answer to question 2 is both a and b.The factor model describes the differences among ths expected return of securities and also describes the variation in security returns around their expected returns.

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