Tests of the CAPM That Use Regression Techniques Are Subject

question 54

Multiple Choice

Tests of the CAPM that use regression techniques are subject to inaccuracies because

• A) the statistical results used are almost always incorrect.
• B) the slope coefficient of the regression equation is biased downward.
• C) the slope coefficient of the regression equation is biased upward.
• D) the intercept of the regression equation is biased downward.
• E) the intercept of the regression equation is equal to the risk-free rate.

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Definitions:

Natural Resources

Raw materials and resources provided by nature that can be utilized for economic gain, such as minerals, forests, water, and arable land.

Economic Integration

The process by which different countries agree to remove trade barriers between them, increasing the exchange of goods and services as a single market or through various degrees of shared economic policies.

Corporate Codes

Guidelines and principles that outline ethical standards, corporate governance, and social responsibility expected within a corporation.

Enforcement Mechanism

Procedures or methods used to enforce compliance with laws, regulations, or agreements.