Since the APT does not specify which factors should be used to determine risk premiums, how should we decide which factors to investigate?
a. Researchers should focus on factors that affect firms and industries
b. Researchers should look for the most important unsystematic factors
c. Researchers should concentrate on better defining the market portfolio
D. Researchers should consider factors that correlate highly with uncertainty in consumption and investment opportunities
Answer: D. Researchers should consider factors that correlate highly with uncertainty in consumption and investment opportunities