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Consider the following linear regression model: The i in the regression measures the sensitivity of the security to market risk. measures the deviation from the
Consider the following linear regression model:
The i in the regression
measures the sensitivity of the security to market risk. | ||
measures the deviation from the best fitting line and is zero on average. | ||
measures the diversifiable risk in returns. | ||
measures the historical performance of the security relative to the expected return predicted by the SML. |
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