Consider the regession equation: d6 gb gs(e)e where -the average diference between the monthly return on stock i and the monthy risk tree rate b the beta of stock i s(e)a meanure of the nonsystematic variance of the stocki If you estimated this regression equation and the CAPM was valid, you would expect the estimated coefficient, . has to be Da oqual to the average diference between the monthly retum on the market portolo and the monthly r tee rate Oh equal to the nsk-hren rate of retum. De. None of the options are corect

Glencoe Algebra 1, Student Edition, 9780079039897, 0079039898, 2018
18th Edition
ISBN:9780079039897
Author:Carter
Publisher:Carter
Chapter4: Equations Of Linear Functions
Section4.6: Regression And Median-fit Lines
Problem 17HP
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Consider the regession equation: do gib + g(e)
where
6-the average diference between the monthly retum on stock i and the monthly risk free rate
bthe beta of stocki
s(e)a measure of the nonsystematic variance of the stocki
If you estimated this regression equation and the CAPM was valid, you would expect the estimated coefficient, g. has to be
Da equal to the average dference between me monthly retum on the market portfolo and the monthly r tee rate
Oh equal to the nsk-thren rate of retum.
De. None of the options are correct
Transcribed Image Text:Consider the regession equation: do gib + g(e) where 6-the average diference between the monthly retum on stock i and the monthly risk free rate bthe beta of stocki s(e)a measure of the nonsystematic variance of the stocki If you estimated this regression equation and the CAPM was valid, you would expect the estimated coefficient, g. has to be Da equal to the average dference between me monthly retum on the market portfolo and the monthly r tee rate Oh equal to the nsk-thren rate of retum. De. None of the options are correct
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