Many investors look at the beta coefficients provided by investment advisors based on least squares estimates of the model R i R M , where R i is the rate of return on a stock and R M is the return on a market average, such as the S P 500 Historical plots of the annual rates of return on two stocks...

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Many investors look at the beta coefficients provided by investment advisors based on least squares estimates of

Question:

Many investors look at the beta coefficients provided by investment advisors based on least squares estimates of the model R_i = α + βR_M + ε, where R_i is the rate of return on a stock and R_M is the return on a market average, such as the S&P 500. Historical plots of the annual rates of return on two stocks and the market as a whole over a 10-year period are shown in Figure 8.14. During this period, which of these two stock returns had the higher

a. Mean?

b. Standard deviation?

c. Beta coefficient?

d. R²? image text in transcribed