Financial Risk Manager Part 1

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A junior analyst at a wealth management firm is performing a regression analysis that uses the return of a stock as the dependent variable and the market index return as the independent variable. From the results of the regression, the analyst calculates the R² measure of fit as 0.831. Which of the following statements would the analyst be correct to conclude from the calculated R² value?

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The ratio of the variation explained by the regression to the total variation in the data about its mean is 0.831.

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An R² of 0.831 implies that most of the variation in the independent variable is correlated with the variation in the model errors.

An R² of 0.831 implies that the stock return increases by an average of 0.831% when the market index return increases by 1%.