The three factors that appear to be most relevant when testing the APT relate to:

A) unexpected interest rates, inflation and economic growth
B) expected interest rates, inflation and economic growth
C) expected and unexpected interest rates and economic growth
D) expected and unexpected interest rates and inflation

Question

The three factors that appear to be most relevant when testing the APT relate to:

A) unexpected interest rates, inflation and economic growth
B) expected interest rates, inflation and economic growth
C) expected and unexpected interest rates and economic growth
D) expected and unexpected interest rates and inflation

Quizplus · Accepted Answer

Despite a large volume of work,there is no clear consensus as to which particular variables are relevant pricing factors.For instance,Cho,Eun and Senbet (1986)test the APT at the international level for 11 industrial economies and report between one and five factors.However,in the main,variables related to (unexpected)interest rate structures,inflation and economic growth appear to be relevant most frequently.

The Three Factors That Appear to Be Most Relevant When