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Problem 4. True or False? Explain your reasoning (a) APT assumes that investors only care about mean and variance of their end-of-ternm (b) CAPM assumes
Problem 4. True or False? Explain your reasoning (a) APT assumes that investors only care about mean and variance of their end-of-ternm (b) CAPM assumes that returns are generated by a one-factor model, and that factor is the (c) You analyze GM monthly stock returns during the last 20 years. Suppose you do a portfolio wealth. market return regression on the three Fama-French factors, and you find that, whichever 3-year period you choose, the alpha of the regression is negative and significant. This would indicate that APT is not true (d) Suppose you do some APT regressions on a set of given factors, and each time you do a regression, you get an R2 of at least 80%. This indicates that APT is true with those factors
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