A linear regression was done to estimate the relation between Santos' share returns and the market's return. The intercept of the line was found to be 0.23 and the slope was 1.47. Which of the following statements is true regarding Santos shares?

Question

Quizplus · Accepted Answer

The slope of the regression line represents the beta of the stock. Therefore, Santos' beta is 1.47. The intercept of the line is not related to the standard deviation of excess returns or the risk-free rate. Therefore, options A and B are incorrect. The intercept is simply the expected return when the market return is zero, which in this case is 0.23. Therefore, option D is also incorrect.

A Linear Regression Was Done to Estimate the Relation Between