Reading 11- LOS F (Part 1): Q6 returns, between, following, industry, border

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6.regression between the returns on a stock and its industry index returns gives the following results:

	Coefficient	Standard Error	t-value
Intercept	2.1	2.01	1.04
Industry Index	1.9	0.31	6.13

§   The t-statistic critical value at the 0.01 level of significance is 2.58

§   Standard error of estimate = 15.1

§   Correlation coefficient = 0.849

The regression statistics presented indicate that the dispersion of stock returns about the regression line is:

A)   63.20.

B)   72.10.

C)   7.75.

D)   15.10.

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The correct answer was D)

The standard deviation of the differences between the actual observations and the projection of those observations (the regression line) is called the standard error of the estimate. The standard error of the estimate is the unsystematic risk.