A factor is a variable that:
A)affects the returns of risky assets in a systematic fashion.
B)affects the returns of risky assets in an unsystematic fashion.
C)correlates with risky asset returns in a unsystematic fashion.
D)does not correlate with the returns of risky assets in an systematic fashion.
E)None of the above.

Question

Quizplus · Accepted Answer

A factor is a variable that affects the returns of risky assets in a systematic fashion. Factors can include interest rates, inflation, and economic growth, among others, and they can have a significant impact on the performance of a portfolio. By identifying and analyzing these factors, investors can make more informed decisions about their investments and potentially achieve better returns.

A Factor Is a Variable That