Under the Market Model,the regression line that results when the return of a security is plotted against the market index return is the:
A)SML.
B)CML.
C)characteristic line.
D)slope.

Question

Quizplus · Accepted Answer

The regression line that results when the return of a security is plotted against the market index return is called the characteristic line. It shows the relationship between the security's return and the market return, and allows investors to analyze the security's beta or systemic risk. The SML (Security Market Line) and CML (Capital Market Line) are used in the Capital Asset Pricing Model (CAPM), which is a different model than the Market Model. The slope of the characteristic line is one of its components but not its name.

Under the Market Model,the Regression Line That Results When the Return