Consider the Regression Equation: R_i - R_f = G₀

question 55

Multiple Choice

Consider the regression equation: r_i - r_f = g₀ + g₁b_i + g₂s²(e_i) + e_it
Where:
R_i - r_t = the average difference between the monthly return on stock i and the monthly risk-free rate
B_i = the beta of stock i
S²(e_i) = a measure of the nonsystematic variance of the stock i
If you estimated this regression equation and the CAPM was valid, you would expect the estimated coefficient, g₂, to be

• A)0.
• B)1.
• C)equal to the risk-free rate of return.
• D)equal to the average difference between the monthly return on the market portfolio and the monthly risk-free rate.
• E)None of the options

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Definitions:

Strategies

Planned actions or policies designed to achieve a major or overall aim and to secure a competitive position in the market.

Airlines

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Strategies

Plans of action designed to achieve long-term or overall goals and objectives.

Mission

A statement that defines the purpose, goals, and values of an organization, guiding its strategies, decisions, and operations.