Which of the following is not a step required for a multifactor risk model to estimate expected return for an individual stock position?
A) identify a set of K common risk factors
B) estimate the risk premia for the factors
C) estimate the sensitivities of each stock to these K factors
D) calculate the expected returns using linear programming analysis
E) All of these are correct.

Question

Quizplus · Accepted Answer

Linear programming analysis is not typically used in the calculation of expected returns for individual stock positions using a multifactor risk model. The other options listed are required steps in the process.

Which of the Following Is Not a Step Required for a Multifactor