Use the Equation for the Question(s)below

question 104

Multiple Choice

Use the equation for the question(s) below.
Consider the following linear regression model:
(R_i - r_f) = a_i + b_i(R_Mkt - r_f) + e_i
-The a_i in the regression:

• A)measures the sensitivity of the security to market risk.
• B)measures the deviation from the best fitting line and is zero on average.
• C)measures the diversifiable risk in returns.
• D)measures the historical performance of the security relative to the expected return predicted by the SML.

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Definitions:

Stimulus

Any event or situation that evokes a response from an organism.

Systematic Desensitization

A behavioral therapy technique used to reduce phobic responses or anxiety through gradual exposure to the feared object or situation coupled with relaxation exercises.

Counterconditioning

A behavioral therapy technique that involves teaching the patient to associate a positive response with a stimulus that previously elicited a negative response.

CS

Stands for "Conditioned Stimulus," which is a previously neutral stimulus that, after becoming associated with the unconditioned stimulus, eventually comes to trigger a conditioned response.