In graphically depicting the model for security returns usually referred to as the market model, the slope of the line can be thought of as the:
A) Beta factor.
B) Error term.
C) Residual term.
D) Alpha factor.
E) None of the above.

Question

Quizplus · Accepted Answer

The slope of the line in the market model, which graphically depicts the relationship between the returns on a security and the returns on the market as a whole, is referred to as the Beta factor. Beta measures the sensitivity of the security's returns to the market returns, indicating how much the security's returns are expected to change in response to a change in the market returns.

In Graphically Depicting the Model for Security Returns Usually Referred