Refer to the top-right panel of Figure 9.2. What proportion of Dow Chemical's returns was explained by
Question:
Refer to the top-right panel of Figure 9.2. What proportion of Dow Chemical's returns was explained by market movements? What proportion of risk was diversifiable? How does the diversifiable risk show up in the plot? What is the range of possible errors in the estimated beta?
FIGURE 9.2
Transcribed Image Text:
Dow return, % Dow retum, % B 1.65 (0.17) 0.44 0.60 Market return, % Market return, % 30 20 10 10 20 30 40 30 0-10 1020 3040 November 2004- October 2009 November 2009- October 2014 Microsoft return, % Microsoft return, % β = 0.98 (0.16) 0.35 p 0.95 0.37 Market return, % Market return, % 30 20 10 20 30 40 30 20 .10 20 30 40 November 2004- October 2009 November 2009- October 2014 Campbell Soup return, % Campbell Soup return, % β = 0.39 (0.16) R2 = 0.10 -0.08 Market return, % Market return, % -30 20 10 10203040-30-20-10'90 20 30 40 November 2004- October 2009 November 2009- October 2014
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Related Book For
Principles of Corporate Finance
ISBN: 978-1259144387
12th edition
Authors: Richard Brealey, Stewart Myers, Franklin Allen
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