Leila Corporation Used the Following Regression Model to Determine If

Multiple Choice

Leila Corporation used the following regression model to determine if the forecasts over the last ten years were biased:
S_t = a₀ + a₁Ft -1+ m_t,
Where S_t is the spot rate of the yen in year t and Ft _-1 is the forward rate of the yen in year t - 1. Regression results reveal coefficients of a₀ = 0 and a₁ = .30. Thus, Leila Corporation has reason to believe that its past forecasts have ____ the realized spot rate.

A) overestimated
B) underestimated
C) correctly estimated
D) none of the above