Consider the Regression Equation

question 29

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) the security market line
• C) the capital market line
• D) all of these
• E) none of these

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