in the portfolio management question - in mock paper one the equation about the GDP/Inflation suprises… The answer says its a macroeconomic model - however it has the risk free rate as the first variable in the equation. I though macroecon model has expected return calced from APT for example??
Macroeconomic models are all about surprises in the market. Fundamentals are about valuation metrics. What if the macro model is a form of the APT model though? Your input variables and sednsitives are still all about macro event surprises right? I think thats the line of thinking here…
The APT factor sensitivities in this question are calculated using the Macroeconomic Multifactor Model. Exhibit 1 just shows the results of that macroeconomic model. APT sensitivities are found via regression (macroeconomic model in this case)
I had the same question. Thanks McLeod.