Exam 12: An Alternative View of Risk and Return: the Arbitrage Pricing Theory

What would the stock's total return be if the actual growth in each of the factors was equal to growth expected? Assume no unexpected news on the patent.

Parametric or empirical models rely on:

Three factors likely to occur in the APT model are:

For a diversified portfolio including a large number of stocks,the:

The acronym APT stands for:

In a portfolio of risky assets,the response to a factor,Fi,can be determined by:

Discuss the Fama-French three factor model;both what it means and the factors of the model.

The systematic response coefficient for productivity, $\beta$ _p,would produce an unexpected change in any security return of __ $\beta$ _P if the expected rate of productivity was 1.5% and the actual rate was 2.25%.

A growth stock portfolio and a value portfolio might be characterized:

You have a 3 factor model to explain returns.Explain what a factor represents in the context of the APT? Each factor is multiplied by a beta.What do these represent and how do they relate to the actual return?

Suppose the JumpStart Corporation's common stock has a beta of 0.8.If the risk-free rate is 4% and the expected market return is 9%,the expected return for JumpStart's common stock is:

In the one factor (APT)model,the characteristic line to estimate $\beta$ i passes through the origin,unlike the estimate used in the CAPM because:

The single factor APT model that resembles the market model uses _________ as the single factor.

The unexpected return on a security,U,is made up of:

The acronym CAPM stands for:

Suppose the Carz Corporation's common stock has a beta of 0.9.If the risk-free rate is 3.5% and the expected market return is 9%,the expected return for JumpStart's common stock is:

Assuming that the single factor APT model applies,the beta for the market portfolio is:

Both the APT and the CAPM imply a positive relationship between expected return and risk.The APT views risk:

In the equation R = + U,the three symbols stand for:

Shareholders discount many corporate announcements because of their prior expectations.If an announcement causes the price to change it will mostly be driven by: