Consider the Regression Equation: R_it - R_ft = A_i

question 7

Multiple Choice

Consider the regression equation: r_it - r_ft = a_i + b_i(r_mt - r_ft) + e_it
Where:
R_it = return on stock i in month t
R_ft = the monthly risk-free rate of return in month t
R_mt = the return on the market portfolio proxy in month t
This regression equation is used to estimate

• A)the security characteristic line.
• B)benchmark error.
• C)the capital market line.
• D)All of the options are correct.

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