The primary purpose of regressing a manager’s excess returns against the excess returns of their peer group is to determine whether the manager demonstrates skill over and above the peer group. This is done by examining the alpha term in the regression output. The alpha term represents the excess return that the manager is able to generate over and above the peer group, after adjusting for risk. If the alpha term is positive and statistically different from zero, it suggests that the manager has skill and is able to generate excess returns consistently. This is not a result of luck or random chance, but rather a reflection of the manager’s ability to make effective investment decisions. Therefore, the regression analysis serves as a tool for evaluating the manager’s performance relative to their peers.

Choice B is incorrect. Regression analysis in financial management is not typically used to determine if a manager's above-average returns are the result of executing unauthorized trades. Unauthorized trades would be identified through compliance and control mechanisms, not statistical analysis.

Choice C is incorrect. While regression analysis can provide insights into various aspects of a manager’s performance, it does not directly measure the absolute level of leverage employed by the manager as compared to their peer group. Leverage levels would be determined through other financial metrics and ratios.

Choice D is incorrect. The primary purpose of regression analysis in this context is not to measure the absolute level of return generated by the manager but rather to compare their excess returns with those of their peers, which helps in determining whether they demonstrate skill over and above that group.