If we regress the returns of a stock on the market index returns, the observed...
50.1K
Verified Solution
Link Copied!
Question
Finance
If we regress the returns of a stock on the market index returns, the observed points will most likely not all lie on the line estimate. Why?
That is because the stock has most likely outperformed the market.
That is because regression analysis should not be used to regress stock returns on the market index returns.
This occurs because the R-Square is very high.
That is because there are other variables that also determine the returns of the stock and have not been included in the regression as independent variables.
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Zin AI - Your personal assistant for all your inquiries!
