Use the equation for the question(s) below.Consider the following regression model:
Rs - rf = as +
(RF1 - rf) +
(RF2 - rf) + εs
-The term as is a(n) :
A) error term that has an expectation of zero and is uncorrelated with either factor.
B) measure of the expected percent change in the excess return of a security for a 1% change in the excess return of the first factor portfolio.
C) measure of the expected percent change in the excess return of a security for a 1% change in the excess return of the second factor portfolio.
D) constant term.
Correct Answer:
Verified
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