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For the SLR model y = Bo+Bxiui, with y; as the IBM stock return and x, as the market return (CAPM) that are both
For the SLR model y = Bo+Bxiui, with y; as the IBM stock return and x, as the market return (CAPM) that are both in original units, e.g., 0.05 means 5% monthly return. = Show that Avi B, i.e., the slope coefficent captures the units of changes in y corresponding to one unit change of xi Suppose we only change the unit of x, to percentage points, i.e., the market return x; will be 5 for the 5% monthly return. Does this change the values of Bo, and B? If so, by how much? Suppose we only change the unit of y, to percentage points, i.e., the IBM stock return y; will be 5 for the 5% monthly return. Does this change the values of B0, and ? If so, by how much? Do the two changes of units above make R different? Use the definition of R to prove it. 3. (2/10) For the SLR model y = Bx+u, i.e., regrssion without intercept, Use the OLS principal to derive the OLS estimator of B for this model. Compare the OLS estimator for this regression with that for the regression with intercept. Under what conditions are the two estimators equal to each other?
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