One way that Black, Jensen and Scholes overcame the problem of measurement error was to
A)group securities into portfolios.
B)use a two-stage regression methodology.
C)reduce the precision of beta estimates.
D)set alpha equal to one.

Question

Quizplus · Accepted Answer

By grouping securities into portfolios, Black, Jensen and Scholes were able to reduce the impact of individual security-specific measurement errors on their overall analysis. This approach allowed for a more accurate and representative measure of the relationship between the portfolio's returns and the market returns.

One Way That Black, Jensen and Scholes Overcame the Problem