In a factor model,the return on a stock in a particular period will be related to
A) factor risk.
B) non-factor risk.
C) standard deviation of returns.
D) both a and b are true.
E) none of these are true.

Question

Quizplus · Accepted Answer

In a factor model, the return on a stock is related to both factor risk (systematic risk) and non-factor risk (idiosyncratic risk). Factor risk is associated with common factors affecting multiple stocks, while non-factor risk is specific to the individual stock.

In a Factor Model,the Return on a Stock in a Particular