CFA Practice Question

There are 208 practice questions for this study session.

CFA Practice Question

Which of the following statements most accurately describes a situation in which the regression coefficient between a security and the market index is 0.4?

A. Movements in the market explain 40% of the variation in the security's return.
B. For every percent move in the market, the security's return is expected to change by 0.4%
C. The relationship between the two securities is positive, however, the degree to which they move in the same direction is not perfect.
D. This certainly implies that portfolio has a high degree of unsystematic risk.
Correct Answer: B

Regression coefficient is really the slope of a regression equation.

User Contributed Comments 7

User Comment
danlan2 Other choices are for correlation coefficient, not regression coefficient.
xiajessy what is the difference of regression coefficient and correlation coefficient? under this situation in the question.
vi2009 corr coefficient = measures how security & the market index moves ... base on the formula COV = p x Qsub security x Qsub market index

regression coefficient is simply the slope of the regression model.
Narsi Regression coefficient = Correlation coefficient x SD(y) / SD(x)
tedolini regression coefficient = correlation coefficient x sd(y)/sd(x)
ericczhang B is only really true of the regression equation is log-log...
davidt876 @danlan2: option 'A' wouldn't apply for a correlation coefficient - but would apply for the correlation coefficient squared (coefficient of determination)
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