If the stock return increases at a slower rate than the market return,the slope of the regression line is ________.
A)greater than one
B)equal to one
C)lesser than one
D)equal to zero

Question

Quizplus · Accepted Answer

The slope of the regression line measures the degree to which the stock return is affected by changes in the market return. If the stock return increases at a slower rate than the market return, it means that the stock is less responsive to the market and therefore has a smaller slope. Since the slope is a measurement of the increase in stock returns per unit increase in market returns, a smaller slope implies that the rate of increase of the stock return is less than that of the market return, hence the slope is less than one.

If the Stock Return Increases at a Slower Rate Than