The factor F in the APT model represents A) firm-specific risk. B) the sensitivity of the firm to that factor. C) a factor that affects all security returns. D) the deviation from its expected value of a factor that affects all security returns. E) a random amount of return attributable to firm events.

Question

Quizplus · Accepted Answer

F measures the unanticipated portion of a factor that is common to all security returns.

The Factor F in the APT Model Represents