Multifactor models seek to improve the performance of the single-index model by
A)modeling the systematic component of firm returns in greater detail.
B)incorporating firm-specific components into the pricing model.
C)allowing for multiple economic factors to have differential effects.
D)All of the options are correct.

Question

Quizplus · Accepted Answer

Multifactor models seek to improve the performance of the single-index model by modeling the systematic component of firm returns in greater detail, incorporating firm-specific components into the pricing model, and allowing for multiple economic factors to have differential effects. Therefore, all of the options are correct.

Multifactor Models Seek to Improve the Performance of the Single-Index