{"id":49101,"date":"2024-04-15T22:50:55","date_gmt":"2024-04-15T22:50:55","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=49101"},"modified":"2024-04-15T22:50:55","modified_gmt":"2024-04-15T22:50:55","slug":"in-arbitrage-pricing-theory-required-returns-are-functioned-of-two-factors-which-have","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/in-arbitrage-pricing-theory-required-returns-are-functioned-of-two-factors-which-have\/","title":{"rendered":"In arbitrage pricing theory, required returns are functioned of two factors which have"},"content":{"rendered":"<p>\r\n    <!-- Check if it's an AMP page -->\r\n            <!-- Non-AMP version -->\r\n        <div class=\"mcq-container\" data-quiz-id=\"quizState_6a977bf77a9d2\">\r\n                                            <div class=\"option\" data-option-key=\"option1\" data-is-correct=\"false\">\r\n                    dividend policy                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option2\" data-is-correct=\"false\">\r\n                    market risk                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option3\" data-is-correct=\"false\">\r\n                    historical policy                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option4\" data-is-correct=\"true\">\r\n                    Both A and B                <\/div>\r\n                            \r\n            <!-- Feedback messages for non-AMP -->\r\n            <div class=\"feedback\" data-feedback=\"wrong\">Answer is Right!<\/div>\r\n            <div class=\"feedback\" data-feedback=\"right\">Answer is Wrong!<\/div>\r\n        <\/div>\r\n\r\n        <script>\r\n        document.addEventListener('DOMContentLoaded', function () {\r\n            var containers = document.querySelectorAll('.mcq-container');\r\n\r\n            containers.forEach(function(container) {\r\n                var options = container.querySelectorAll('.option');\r\n                var feedbackSelect = container.querySelector('[data-feedback=\"select\"]');\r\n                var feedbackWrong = container.querySelector('[data-feedback=\"wrong\"]');\r\n                var feedbackRight = container.querySelector('[data-feedback=\"right\"]');\r\n\r\n                options.forEach(function(option) {\r\n                    option.addEventListener('click', function() {\r\n                        var selectedOption = option.getAttribute('data-option-key');\r\n                        var isCorrect = option.getAttribute('data-is-correct') === 'true';\r\n\r\n                        \/\/ Remove previous selections\r\n                        options.forEach(function(opt) {\r\n                            opt.classList.remove('correct', 'incorrect');\r\n                        });\r\n\r\n                        \/\/ Add the correct\/incorrect class\r\n                        if (isCorrect) {\r\n                            option.classList.add('correct');\r\n                            feedbackRight.hidden = false;\r\n                            feedbackWrong.hidden = true;\r\n                        } else {\r\n                            option.classList.add('incorrect');\r\n                            feedbackRight.hidden = true;\r\n                            feedbackWrong.hidden = false;\r\n                        }\r\n\r\n                        \/\/ Hide select feedback\r\n                        feedbackSelect.hidden = true;\r\n                    });\r\n                });\r\n            });\r\n        });\r\n        <\/script>\r\n    \r\n    <!--more--><\/p>\n<p>The correct answer is: <strong>D. Both A and B<\/strong><\/p>\n<p>Arbitrage pricing theory (APT) is a general equilibrium theory of asset pricing that asserts that the expected return of a security is a linear function of a number of factors, including the market factor and a number of firm-specific factors.<\/p>\n<p>The market factor is a measure of the overall riskiness of the market, and the firm-specific factors are measures of the riskiness of the individual firm. The beta of a security is a measure of its sensitivity to the market factor, and the alpha of a security is a measure of its excess return over the expected return given its beta.<\/p>\n<p>APT is a more general theory than the capital asset pricing model (CAPM), which only considers the market factor. APT can be used to explain why some stocks have higher expected returns than others, even after controlling for their betas.<\/p>\n<p>Option A: dividend policy is not a factor in APT. APT is a theory of asset pricing, and dividend policy is a decision made by the firm&#8217;s management. APT assumes that the firm&#8217;s management will make decisions that maximize the firm&#8217;s value, and that the firm&#8217;s value <div class=\"youtube-subscribe-container\">\r\n        <a href=\"https:\/\/www.youtube.com\/channel\/UCNHT8lW-JmLC68rjBfZhdkg?sub_confirmation=1\" target=\"_blank\" class=\"youtube-subscribe-button\">\r\n            <span class=\"youtube-icon\">\r\n                <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" viewBox=\"0 0 576 512\">\r\n                    <path d=\"M549.7 124.1c-6.3-23.7-24.8-42.3-48.3-48.6C458.8 64 288 64 288 64S117.2 64 74.6 75.5c-23.5 6.3-42 24.9-48.3 48.6-11.4 42.9-11.4 132.3-11.4 132.3s0 89.4 11.4 132.3c6.3 23.7 24.8 <div class=\"telegram-channel-container\">\r\n        <a href=\"https:\/\/t.me\/pscnotes2025\" target=\"_blank\" class=\"telegram-channel-button\">\r\n            <span class=\"telegram-icon\">\r\n                <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" viewBox=\"0 0 496 512\">\r\n                    <path fill=\"white\" d=\"M248,8C111,8,0,119,0,256s111,248,248,248s248-111,248-248S385,8,248,8z M362,177L320,367c-3,14-10,18-20,14l-56-41l-27,26 c-3,3-5,5-10,5l4-63L323,196c5-5-1-7-8-3l-98,62l-42-13c-9-3-10-9,2-14l162-63C351,160,365,164,362,177z\"\/>\r\n                <\/svg>\r\n            <\/span>\r\n            Join Our Telegram Channel\r\n        <\/a>\r\n    <\/div> 41.5 48.3 47.8C117.2 448 288 448 288 448s170.8 0 213.4-11.5c23.5-6.3 42-24.2 48.3-47.8 11.4-42.9 11.4-132.3 11.4-132.3s0-89.4-11.4-132.3zm-317.5 213.5V175.2l142.7 81.2-142.7 81.2z\"\/>\r\n                <\/svg>\r\n            <\/span>\r\n            Subscribe on YouTube\r\n        <\/a>\r\n    <\/div> will not be affected by the firm&#8217;s dividend policy.<\/p>\n<p>Option B: market risk is a factor in APT. The market factor is a measure of the overall riskiness of the market, and the beta of a security is a measure of its sensitivity to the market factor.<\/p>\n<p>Option C: historical policy is not a factor in APT. APT is a theory of asset pricing, and historical policy is a measure of the firm&#8217;s past performance. APT assumes that the firm&#8217;s past performance is not a good predictor of its future performance.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Join Our Telegram Channel Subscribe on YouTube<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[945],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v22.2 (Yoast SEO v23.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>In arbitrage pricing theory, required returns are functioned of two factors which have<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/exam.pscnotes.com\/mcq\/in-arbitrage-pricing-theory-required-returns-are-functioned-of-two-factors-which-have\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta 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