The more positive the slope is for a security's market model,
A) the more defensive the security.
B) the lower the risk-free return.
C) the more sensitive the security's return is to that in the market.
D) the more the market return can change without affecting the security return.

Question

Quizplus · Accepted Answer

A positive slope in a security's market model indicates a positive linear relationship between its return and the return of the market. Thus, the security's return is more sensitive to changes in the market return. Therefore, option C is the correct answer. Option A is irrelevant, and option B is not necessarily true. Option D is incorrect as a positive slope indicates a strong relationship, meaning changes in the market return will affect the security's return.

The More Positive the Slope Is for a Security's Market