FIN 304 Fall 24 - Quiz #6 (11/14)

If the p-value for a regression coefficient is less than 0.05, what does it indicate?

• The coefficient is not statistically significant
• There is no linear relationship between the independent and dependent variables
• The coefficient is statistically significant, suggesting a strong relationship
• The model cannot be used for prediction
• The error term is minimized

How does a lower R-squared value in a beta regression affect an undiversified investor?

• It indicates lower overall risk
• It makes the stock less appealing due to higher firm-specific risk
• It suggests the stock is safer
• It guarantees higher returns
• It implies that market risk is dominant

Turtle Beach Corporation has a beta of 2.07. What does this imply about its stock?

• It is less volatile than the market
• It has approximately twice the market risk compared to the market.
• It has no systematic risk
• It has more firm-specific risk than market risk
• It is risk-free

Why can’t the parameters of the CAPM be estimated precisely? I. The market index used may be incorrect. II. The firm may have experienced significant changes during the estimation period. III. It is difficult to observe the risk-free interest rate. IV. The CAPM assumes that all stocks have the same beta.

• I and III only
• II and IV only
• I and II only
• III and IV only
• I, II, III, and IV

What does a positive Jensen’s alpha indicate about a stock?

• The stock performed worse than expected
• The stock is likely to have a negative beta
• The stock outperformed the CAPM expectations
• The market is not efficient
• The stock has no systematic risk