Question: Consider the following linear regression model: (Ri - rf) = ai + bi(RMkt - rf) + ei The ai in the regression: measures the deviation

Consider the following linear regression model: (Ri - rf) = ai + bi(RMkt - rf) + ei

The ai 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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