A linear regression to estimate the relation between Research in Motion's stock returns and the market's return gives the best-fitting line that represents the relation between the stock and the market.The slope of this line is our estimate of:
A)alpha.
B)beta.
C)risk-free rate.
D)volatility.
E)standard deviation.

Question

Quizplus · Accepted Answer

The slope of the best-fitting line represents the beta value of the stock. Beta measures the stock's sensitivity to changes in the market's returns. A beta of 1 indicates that the stock moves in line with the market, while a beta of less than 1 indicates that the stock is less risky than the market and a beta of more than 1 indicates that the stock is more risky than the market.

A Linear Regression to Estimate the Relation Between Research in Motion's