Answer: Both I and II.

## Explanation Let's analyze each statement: **I. To attempt to improve the adjusted R² measure** - **CORRECT** - Including multiple factors in regression analysis can help capture more of the variation in portfolio returns - Adjusted R² is a modified version of R² that accounts for the number of predictors in the model - Adding relevant factors can improve the explanatory power of the model **II. To search for a benchmark that is more representative of a portfolio's investment style** - **CORRECT** - Multi-factor models help identify the specific risk exposures and investment style of a portfolio - By including various factors (e.g., market, size, value, momentum), investors can better understand what drives portfolio performance - This helps create more accurate benchmarks that reflect the portfolio's actual investment approach **III. To increase the tests of statistical significance** - **INCORRECT** - Adding more factors doesn't inherently increase statistical significance - In fact, adding irrelevant factors can reduce statistical power and increase the risk of overfitting - Statistical significance depends on the quality and relevance of the factors, not just the quantity Therefore, the correct answer is **C (Both I and II)**.

Author: LeetQuiz .