3 .34 nts Consider the two (excess return) index-model regression results for stocks A and B....
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3 .34 nts Consider the two (excess return) index-model regression results for stocks A and B. The risk-free rate over the period was 7%, and the market's average return was 15%. Performance is measured using an index model regression on excess returns. Index model regression estimates R-square Residual standard deviation, o(e) Standard deviation of excess returns Stock A 1% +1.2(rm -rf) Stock B 2% +0.8(rM - rf) 0.641 11.4% 22.7% 0.469 20.2% 27.1% eBook Print eferences a. Calculate the following statistics for each stock (use whole percent values, 1%, not 0.01 for example, for your calculations): (Round your answers to 4 decimal places.) i. Alpha ii. Information ratio iii. Sharpe ratio iv. Treynor measure Stock A Stock B % % b. Which stock is the best choice under the following circumstances? i. This is the only risky asset to be held by the investor. ii. This stock will be mixed with the rest of the investor's portfolio, currently composed solely of holdings in the market-index fund. iii. This is one of many stocks that the investor is analyzing to form an actively managed stock portfolio. 3 .34 nts Consider the two (excess return) index-model regression results for stocks A and B. The risk-free rate over the period was 7%, and the market's average return was 15%. Performance is measured using an index model regression on excess returns. Index model regression estimates R-square Residual standard deviation, o(e) Standard deviation of excess returns Stock A 1% +1.2(rm -rf) Stock B 2% +0.8(rM - rf) 0.641 11.4% 22.7% 0.469 20.2% 27.1% eBook Print eferences a. Calculate the following statistics for each stock (use whole percent values, 1%, not 0.01 for example, for your calculations): (Round your answers to 4 decimal places.) i. Alpha ii. Information ratio iii. Sharpe ratio iv. Treynor measure Stock A Stock B % % b. Which stock is the best choice under the following circumstances? i. This is the only risky asset to be held by the investor. ii. This stock will be mixed with the rest of the investor's portfolio, currently composed solely of holdings in the market-index fund. iii. This is one of many stocks that the investor is analyzing to form an actively managed stock portfolio.
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