Factor Model Relationships Are Built on the Following Critical Assumptions

Multiple Choice

Factor model relationships are built on the following critical assumptions EXCEPT

A) the random error term and factor are serially correlated in time-series approaches
B) the outcome of the factor has not bearing on the outcome of the random error term
C) the random error terms of any two securities are uncorrelated
D) the outcome of the random error term of one security has no bearing on the outcome of the random error term of the other