Use the Equation for the Question(s)below

question 88

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 e_i in the regression:

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

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Definitions:

Socialist

Pertaining to a political and economic theory of social organization which advocates that the means of production, distribution, and exchange should be owned or regulated by the community as a whole.

Anarchic

Characterized by a lack of structured government or authority, often leading to disorder and confusion.

Theocratic

A theocratic system or government is one in which priests or religious leaders control the state, claiming divine commission or ruling in the name of a deity.

Terrorist Organization

A group involved in premeditated, politically motivated violence against noncombatant targets, usually to influence an audience.