when we are testing for the regression coefficients, typically our hypotheses would be h0:b0=0 or h0:b1=1.
Is b0 considered the risk free rate and we are trying to test that b0 is not equal to 0 because otherwise we get no return? And for b1=1, we are hoping to reject this hypothesis and get a market beta different than 1 because otherwise the stock’s will be as sensitive as the market?
Study together. Pass together.
Join the world's largest online community of CFA, CAIA and FRM candidates.