In a factor model, the return on a stock in a particular period will be related to
A) firm-specific events.
B) macroeconomic events.
C) the error term.
D) both firm-specific events and macroeconomic events.
E) neither firm-specific events nor macroeconomic events.

Question

Quizplus · Accepted Answer

In a factor model, the return on a stock is typically related to both firm-specific events (such as earnings reports, product launches, etc.) and macroeconomic events (such as changes in interest rates, inflation, GDP growth, etc.). These models aim to explain stock returns through various factors that capture different risks and events affecting the stock's performance.

In a Factor Model, the Return on a Stock in a Particular