Can someone please explain to me what the difference between: Statistical Factor Model Factor Sensitivity Model Additionally the answer to this question was that it’s a macro model. However Since the model uses the RFR I didn’t think it was a macro model. Doesn’t a macro model use the E® as an intercept? THis model looks just APT/Macro hybrid. So what’s the difference then between a Macro model and an APT model???


there are two different questions and in Level II - one question does not lead on to the other. Exhibit I makes no mention of any risk free rate or anything like that. Tells you factors correspond to the factor surprises. So it is a macroeconomic model in Q55. Q56 - they ask you to use factors from Exhibit 1 and details from exhibit 2 and come up with a return for a portfolio. they did not tell you that it was a macroecon model, apt model, nothing. It is we who are linking the two together. Am I wrong in stating that?

I think you are right… Man that’s really been bugging me… CPK thanks a lot for all your help!

CP, thanks for this. This got me all confused too. Finding any sort of explanation for this is a great relief. No need for extra confusion at this point. The question wasn’t that well-stated, still… seems like quite a lot of people were as confused as me.