Which of the following is true of the market model regression?

Question

Quizplus · Accepted Answer

The market model regression assumes that a security's return is linearly related to the return of the broader market. The regression intercept does not have a variance equal to the marginal variance, and the regression slope coefficient is not necessarily a constant. The regression residual measures the deviation between the actual return of a security and its expected return based on the market model regression equation. The market return and the regression residual are assumed to be uncorrelated in the market model.

Which of the Following Is True of the Market Model