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If we regress the returns of a stock on the market index returns, the observed...

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Finance

If we regress the returns of a stock on the market index returns, the observed points will most likely not all lie on the line estimate. Why?

That is because the stock has most likely outperformed the market.

That is because regression analysis should not be used to regress stock returns on the market index returns.

This occurs because the R-Square is very high.

That is because there are other variables that also determine the returns of the stock and have not been included in the regression as independent variables.

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