Consider a single-index model. The index portfolio is M. There are 80 individual risky securities on the
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Consider a single-index model. The index portfolio is M. There are 80 individual risky securities on the market.
(1) Calculate the total number of parameters to implement the single-index model.
(2) σM = 0.15. The index model has been estimated for stock A with the following results: RA = -0.01 + 0.9RM + eA. σ(eA) = 0.12. Calculate The standard deviation of the return for stock A.
(3) Following (2), calculate the percentage of systematic risk in the total risk for stock A.
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