In their multifactor model,Chen,Roll,and Ross found
A)that two market indexes,the equally weighted NYSE and the value weighted NYSE,were not significant predictors of security returns.
B)that the value weighted NYSE index had the incorrect sign,implying a negative market risk premium.
C)expected changes in inflation predicted security returns.
D)A and B.
E)A,B,and C.

Question

Quizplus · Accepted Answer

The statement in option A and B are both true. Chen, Roll, and Ross found that the equally weighted NYSE and the value-weighted NYSE were not significant predictors of security returns. Additionally, they found that the value-weighted NYSE index had the incorrect sign, implying a negative market risk premium. Option C is false, as they did not find that expected changes in inflation predicted security returns. Therefore, the best answer is D.

In Their Multifactor Model,Chen,Roll,and Ross Found