When Using a Multiple Regression Model,we Assume That Error Terms

question 132

Multiple Choice

When using a multiple regression model,we assume that error terms (residuals) are distributed according to a(n) ________________ distribution.

• A)Binomial
• B)Normal
• C)Exponential
• D)Poisson

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Definitions:

Expected Return

This refers to the average amount of profit or loss one can expect from an investment based on its historical performance and probabilities of outcomes.

Beta

A measure of a stock's volatility in relation to the overall market; used in the capital asset pricing model (CAPM) to estimate the return of an asset based on its risk.

Market Risk

The risk of losses in investments caused by factors affecting the overall performance of financial markets.

Number of Assets

The total quantity of different types of financial assets, such as stocks, bonds, and real estate, owned by an individual or entity.