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QUESTION 33 Share prices are often found to 'over-react to a profit warning. In a model that regresses the share price on profit warnings, which

QUESTION 33

Share prices are often found to 'over-react to a profit warning. In a model that regresses the share price on profit warnings, which of the following assumptions of the CLRM would most likely be violated due to this characteristic?

a. The errors have zero mean

b. The errors and the x are uncorrelated

c. The errors are statistically independent of one another

d. The xi's are non-stochastic

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