You have the following data on (1) the average annual returns of the market for the past 5 years and (2) similar information on Stocks A and B. Which of the possible A) bA 0; bB = 1. B) bA +1; bB = 0. C) bA = 0; bB = -1. D) bA

Question

You have the following data on (1) the average annual returns of the market for the past 5 years and (2) similar information on Stocks A and B. Which of the possible A) bA > 0; bB = 1. B) bA > +1; bB = 0. C) bA = 0; bB = -1. D) bA < 0; bB = 0. E) bA < -1; bB = 1.

Quizplus · Accepted Answer

We cannot determine the slope of either Stock A or Stock B's regression line based on the given information. However, we know that the market has had positive returns for the past 5 years, meaning that its regression line would have a positive slope (b > 0). Therefore, the only option that fits with this information is D, which assumes a negative slope for Stock A and a zero slope for Stock B.

You Have the Following Data on (1) the Average Annual