Consider the empirical testing of a multi-factor model and the empirical testing of a multi-factor APT model. The goal of each test is to find out if a given model is correct. What are the differences and similarities in procedures for testing these two models?

a.

Testing a multi-factor factor model requires running a multiple linear regression on historical returns and then a multiple linear regression across risky securities, while testing a multi-factor APT model requires running a multiple linear regression on historical returns only.

b.

There are no differences. Each model is tested by running a multiple linear regression across different risky securities

c.

There are no differences. Both models require running a multiple linear regression on historical returns and then a multiple linear regression across risky securities

d.

Testing a multi-factor APT requires running a multiple linear regression on historical returns and then a multiple linear regression across risky securities, while testing a multi-factor model requires running a multiple linear regression on historical returns only.

e.

There are no differences. Each model is tested by running a multiple linear regression on historical returns of a given security