A Model Y = β₀ + β₁x + ε, in Which

question 78

True/False

A model y = β₀ + β₁x + ε, in which y is a binary variable, is called a linear probability model.

---

Definitions:

Government Of Canada

The federal administration and institutions of Canada, responsible for national policy and governance.

Inflation Premium (IP)

The premium added to the real risk-free rate of interest to compensate for the expected loss of purchasing power. The inflation premium is the average rate of inflation expected over the life of the security.

Default Risk Premium (DRP)

The additional yield that investors demand to compensate for the risk of default by the issuer of a bond beyond the risk-free rate.

Liquidity Premium (LP)

Liquidity Premium refers to the extra return investors demand to compensate for investing in securities with low liquidity or those difficult to sell quickly at market value.