Use the equation for the question(s) below.Consider the following regression model:
Rs - rf = as +
(RF1 - rf) +
(RF2 - rf) + εs
-The term
is a(n) :
A) 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.
B) error term that has an expectation of zero and is uncorrelated with either factor.
C) constant term.
D) 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.
Correct Answer:
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