Assume you gathered the historical weekly excess returns for IBM and for a S&P 500 portfolio using data over the last 2 years and plotted them as shown in the scatter plot below. Assume the trend line shown on the plot is from a CAPM motivated regression of the IBM excess returns on the market excess returns. Question: Which of the statements below best describes how the "OLS" regression trend line is found? (Hint: See slide # 11 in the "Regression Review" lecture.) 0.10 Excess returns on IBM -0.10 0.00 -0.20 0 O O -0.2 0 CAPM regression for IBM O O D O O -0.1 00 O o 8 %8 Alf O Bo 0.0 0 Excess returns on MARKET 80 O 0 89 00 30 000 O O O 0 08 O 0.1 0 00 0 The trend line is selected to minimize the sum of the squared residuals O The trend line is selected to maximize the sum of the squared residuals O The trend line is selected to minimize the R-square O The trend line is selected to minimize the beta

Assume you gathered the historical weekly excess returns for IBM and for a S\&P 500 portfolio using data over the last 2 years and plotted them as shown in the scatter plot below. Assume the trend line shown on the plot is from a CAPM motivated regression of the IBM excess returns on the market excess returns. Question: Which of the statements below best describes how the "OLS" regression trend line is found? (Hint: See slide \#11 in the "Regression Review" lecture.) The trend line is selected to minimize the sum of the squared residuals The trend line is selected to maximize the sum of the squared residuals The trend line is selected to minimize the R-square The trend line is selected to minimize the beta