A simple linear regression of the return of firm A, R_A, on the return of firm B, R_B, based on 18 observations, is = 2.2 + 0.4 R_B. If the coefficient of determination from this regression is 0.09, calculate the correlation between R_Aand . A) 0.03 B) 0.04 C) 0.09 D) 0.30

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The coefficient of determination (R-squared) is equal to the square of the correlation coefficient (r) between the two variables. Therefore, √0.09 = 0.3, which is the correlation between R_Aand 11ea8309_a94f_1dc2_b223_bd2b2553a54b_TB6618_11.

A Simple Linear Regression of the Return of Firm A