If you were to regress the historical returns of a stock on the historical return of a general market index, you would plot the line of best fit through those data points. The slope of that line represents the beta of the stock in question. However, in most instances the date points do not lie exactly on that line. Describe why.

Question

Quizplus · Accepted Answer

The Answer of If you were to regress the historical returns of a stock on the historical return of a general market index, you would plot the line of best fit through those data points. The slope of that line represents the beta of the stock in question. However, in most instances the date points do not lie exactly on that line. Describe why.

If You Were to Regress the Historical Returns of a Stock