The index model has been estimated for stocks A and B with the following results: RA=...
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The index model has been estimated for stocks A and B with the following results: RA= 0.12 + 0.6RM + es R = 0.04 + 1.4RM + es OM = 0.26 (es) = 0.10 o(e) = 0.20 a. What is the covariance between the returns on stock A and B? b. What is the variance of each stock? c. Break down the variance of each stock into the systematic and the firm-specific risk components. d. What is the covariance between each stock and the market index? e. What is the correlation coefficient between the two stocks? | The index model has been estimated for stocks A and B with the following results: RA= 0.12 + 0.6RM + es R = 0.04 + 1.4RM + es OM = 0.26 (es) = 0.10 o(e) = 0.20 a. What is the covariance between the returns on stock A and B? b. What is the variance of each stock? c. Break down the variance of each stock into the systematic and the firm-specific risk components. d. What is the covariance between each stock and the market index? e. What is the correlation coefficient between the two stocks? |
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a Covariance between returns on stock A and B CovRA ... View the full answer
Related Book For
Understanding Basic Statistics
ISBN: 9781111827021
6th Edition
Authors: Charles Henry Brase, Corrinne Pellillo Brase
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