Tests of multifactor models indicate
A)the single-factor model has better explanatory power in estimating security returns.
B)macroeconomic variables have no explanatory power in estimating security returns.
C)it may be possible to hedge some economic factors that affect future-consumption risk with appropriate portfolios.
D)multifactor models do not work.

Question

Quizplus · Accepted Answer

Tests of multifactor models indicate that it may be possible to hedge some economic factors that affect future-consumption risk with appropriate portfolios. The other options presented are not supported by research on multifactor models.

Tests of Multifactor Models Indicate