Discuss whether the following statement is true or false:
A multi-index model will predict returns better than a single-index model.

Question

Quizplus · Accepted Answer

The multi-index model lies in an intermediate position between the full historical correlation matrix and the single-index model in its ability to reproduce the historical correlation matrix.Adding more indexes complicates things but result in a more accurate representation of the historical correlation matrix.However,this does not imply that future correlation matrices will be forecast more accurately.

Discuss Whether the Following Statement Is True or False