Schweser Exam 2, Morning Session equation, factor

dvilayphet

Q. 11
HOW DO WE KNOW THAT THE MARKETS MOVE AS EXPECTED AND THE BOTH FACTORS CAN BE ZERO????
The equation for the macroeconomic factor model employed by Factor Analytics Capital Management is: REF = aEF + bEF,1FGDP + bEF,2FIS +

Iginla2010

If I recall the question you’re asking about, I was confused about why you used the APT expected return vs. the CAPM expected return (both were provided in the vignette, but only the APT return was one of the options).
Is that just because only the APT return was provided, or is it always proper to use APT expected return in a macroeconomic factor?

YouCanDoIt

The intercept of the macroeconomic model is the E(R) from APT. The intercept tells us that when the factor surprises are 0 the return is equal to the return from APT.

economicz

can you post more of the question? am at work, my exam is at home.