A "factor" in APT is a variable that:
A) is pure "noise"
B) correlates with risky asset returns in an unsystematic manner
C) affects the return of risky assets in a systematic manner
D) affects the return of a risky asset in a random manner

Question

Quizplus · Accepted Answer

In APT, factors are variables that affect the return of risky assets in a systematic manner, meaning that they have a consistent and predictable impact on asset returns. Factors are not pure noise or random variables, nor do they correlate with risky asset returns in an unsystematic manner.

A "Factor" in APT Is a Variable That