Refer to the separation of market-wide and firm-specific security returns as shown in Figure 5.2. What factors could reduce the accuracy of the estimate of abnormal returns?

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Figure 5.2 Separating Market-Wide and Firm-Specific Security Returns Using the Market Model Rit Actual return 0.0015 (abnormal return) = 0.0006 Expected return 0.0009 = Slope - B = 0.80 RMt Rit = = Intercept a = 0.0001 Return on market portfolio for period t Return on firm j's shares for period t 0.001 PMI