Claus and Thomas (2001)use Forecasts by Security Analysts and Conclude

question 8

Multiple Choice

Claus and Thomas (2001) use forecasts by security analysts and conclude that the market risk premium is approximately:

• A)2% p.a.
• B)3% p.a.
• C)4% p.a.
• D)1% p.a.

---

Definitions:

Least Squares Estimate

A statistical method used to determine the line of best fit by minimizing the sum of the squares of the differences between observed values and those predicted by the model.

Independent Variable

In scientific research, the factor that is deliberately adjusted or controlled to test its effect on the outcome being studied.

Regression Equation

A formula that represents the relationship between a dependent variable and one or more independent variables, used to predict or estimate outcomes.

SSE

Cumulative squared discrepancies between predicted values by a model and the corresponding actual data points.