Parametric or empirical models rely on:
A) security betas explaining systematic factor relationships.
B) finding regularities and relations in past market data.
C) there being no true explanations of pricing relationships.
D) always being able to find the exception to the rule.
E) None of these.

Question

Quizplus · Accepted Answer

Parametric or empirical models rely on finding regularities and relationships in past market data. They do not necessarily explain the true reasons for pricing relationships but instead use historical data to make predictions or estimates. Security betas are often utilized in these models, but only as a tool to help identify systematic factor relationships. While some exceptions to these regularities may exist, the models are still effective in providing useful insights and predictions.

Parametric or Empirical Models Rely On