You Run a Regression of a Stock's Returns Versus a Market

question 38

Multiple Choice

You run a regression of a stock's returns versus a market index and find the following:

Based on the data, you know that the stock ________.

• A) earned a positive alpha that is statistically significantly different from zero
• B) has a beta precisely equal to .890
• C) has a beta that is likely to be anything between .6541 and 1.465 inclusive
• D) has no systematic risk

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Definitions:

Athletic Contests

Competitive physical activities or sports where participants aim to display superior strength, speed, or skill.

Trade and Economic Exchanges

The act of buying, selling, or exchanging goods and services between people or countries, facilitating the distribution of resources, creation of wealth, and economic interdependence.

Self-fulfilling Prophecy

A forecast that, whether directly or indirectly, ensures its own fulfillment through a positive loop between belief and action.

Social Trap

Situations where individuals or groups act against their long-term communal interests by pursuing short-term personal gains.