Question: Answer and explain in detail Consider the following linear regression model: (R_i - r_f) = alpha_i + b_i(R_Mkt - r_f) + e_i The e_i in

Answer and explain in detail

Answer and explain in detail Consider the following linear regression model: (R_i

Consider the following linear regression model: (R_i - r_f) = alpha_i + b_i(R_Mkt - r_f) + e_i The e_i in the regression 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. measures the sensitivity of the security to market risk

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