Consider the following linear regression model for the return of stock I: (R_i - r_f) = a_i + bi(R_M - r_f) + e_i , The a_i in the regression

1. measures the sensitivity of the security to market risk.

2. measures the historical performance of the security relative to the expected return predicted by the SML/CAPM.

3. measures the deviation from the best fitting line and is zero on average.

4. measures the diversifiable risk in returns.