In a multi-factor APT model,the coefficients on the macro factors are often called ______.
A)systemic risk
B)firm-specific risk
C)idiosyncratic risk
D)factor loadings
E)none of the above

Question

Quizplus · Accepted Answer

In a multi-factor APT model, the coefficients on the macro factors are called factor loadings. These loadings represent the sensitivity of a specific security or portfolio to the underlying macro factors. Therefore, the correct choice is D, factor loadings. A is incorrect because systemic risk refers to the risk that the entire market or system could face, while B and C refer to firm-specific risks that are irrelevant in this context. E is incorrect because one of the choices must be correct.

In a Multi-Factor APT Model,the Coefficients on the Macro Factors