Analysts May Use Regression Analysis to Estimate the Index Model $\alpha$

question 19

Multiple Choice

Analysts may use regression analysis to estimate the index model for a stock.When doing so, the slope of the regression line is an estimate of

• A)the \(\alpha\) of the asset.
• B)the \(\beta\) of the asset.
• C)the \(\sigma\) of the asset.
• D)the \(\delta\) of the asset.

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Definitions:

Independent Variable

The independent variable is the variable that is manipulated or changed in an experiment to test its effect on the dependent variable.

Functional Relationship

A relationship in which changes in one variable are associated with changes in another variable, typically indicating a causal link.

Cause-Effect Relationships

A relationship where one event (the cause) makes another event happen (the effect), demonstrating a connection between actions and outcomes.

Demand Characteristics

Subtle cues or signals in an experimental environment that influence the participants' responses or behaviors.