1. A risk manager performs an ordinary least squares (OLS) regression to estimate the sensitivity of a stock'sreturn to the return on the S&P 500. This OLS procedure is designed to:a. Minimize the square of the sum of differences between the actual and estimated S&P 500 returns. b. Minimize the square of the sum of differences between the actual and estimated stock returns.c. Minimize the sum of differences between the actual and estimated squared S&P 500 returns.d. Minimize the sum of squared differences between the actual and estimated stock returns.

A RISK MANAGER PERFORMS AN ORDINARY LEAST SQUARES (OLS) REGRESSION...

2015 FRM PRACTICE EXAM

A risk manager performs an ordinary least squares (OLS) regression to estimate the sensitivity of a stock's

return to the return on the S&P 500. This OLS procedure is designed to:

Minimize the square of the sum of differences between the actual and estimated S&P 500 returns.

Minimize the square of the sum of differences between the actual and estimated stock returns.

Minimize the sum of differences between the actual and estimated squared S&P 500 returns.

Minimize the sum of squared differences between the actual and estimated stock returns.