A financial analyst is evaluating the relationship between the performance of a specific stock and the S&P 500 Index. In order to perform this analysis, the analyst employs an ordinary least squares (OLS) regression method. Which of the following descriptions correctly characterizes the OLS technique?

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OLS minimizes the square of the sum of differences between the actual and estimated S&P 500 Index returns.

15.8%

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

15.8%

OLS minimizes the sum of differences between the actual and estimated squared S&P500Index returns.

10.3%

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

58.1%

Financial Risk Manager Part 1