Question: For the simple linear regression (SLR) model yi = 0 + 1xi + ui , with yi as the IBM stock return and xi as

For the simple linear regression (SLR) model yi = 0 + 1xi + ui , with yi as the IBM stock return and xi as the market return (CAPM) that are both in original units, e.g., 0.05 means 5% monthly return.

Suppose we only change the unit of xi to percentage points, i.e., the market return xi will be 5 for the 5% monthly return. Does this change the values of 0 , and 1 ? If so, by how much?

Suppose we only change the unit of yi to percentage points, i.e., the IBM stock return yi will be 5 for the 5% monthly return. Does this change the values of 0 , and 1 ? If so, by how much?

Do the two changes of units above make R^2 different? Use the definition of R2 to prove it.

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