Using the market model instead of the full covariance approach
A) does not require the calculation of betas.
B) requires less assumptions.
C) less individual variances need to be estimated.
D) requires less parameter estimate.

Question

Quizplus · Accepted Answer

The market model simplifies the estimation process by reducing the number of parameters needed compared to the full covariance approach, which requires estimating covariances for all pairs of assets.

Using the Market Model Instead of the Full Covariance Approach