3 .34 nts Consider the two (excess return) index-model regression results for stocks A and B....
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
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.
Expert Answer:
Posted Date:
Students also viewed these finance questions
-
i) Starbucks launched its prepaid (debit) Starbucks Card in November 2001. The card, which holds between $5 and $500 can be used at any Starbucks location. Suppose Starbucks management wants to study...
-
Accounting has its own vocabulary and basic relationships. Requirement 1. Match the accounting terms on the left with the corresponding definitions on the right. _______1. Posting A. Using up assets...
-
Write down the expressions for the components of the Euler equation along the x direction.
-
Discuss the payment of receipt of a commission by an accountant in public practice.
-
FireOut, Inc. manufactures steel cylinders and nozzles for two models of fire extinguishers: (1) a home fire extinguisher and (2) a commercial fire extinguisher. The home model is a high-volume...
-
Question 4 Let Q be defined by Q(x) = I' sin(1/x) ifx/ 0 ifr =0 Find the error in the following argument showing that Q'(0) =0. Your answer should explain the problem and indicate how to fix it. (The...
-
Lean describes the following process Reducing inventory and thereby decreasing costs OA crash program to reduce the speed to market Removing waste and delays from steps in the process O Invented...
-
The structure tree (BOM) of product X and the current inventory of our company is shown in the following table. If we want to produce 36 units of product X, how many assembly A\'s and E\'s should be...
-
Required: Determine the materials and labor variances graphically and by formula Pre pare the flexible overhead budget Determine the overhead variances using the two-way overhead variance method....
-
A very long cupper fin (k=200 W/m.K) with a cross sectional area of Ac = 5 mm2 and perimeter of P = 8 mm, is attached to a surface whose temperature is Tb. The fin is subjected to convection heat...
-
Harry died with a gross estate of various assets worth $5,000,000. During his lifetime, Harry gifted land to his daughter. At the time of the gift, the land had a FMV of $1,000,000. Currently, the...
-
A retailer s demand for stock keeping unit ( SKU ) 7 5 6 - RDU, white towels, is 2 0 , 0 0 0 per year. The cost of placing an order is $ 1 5 0 , the cost per unit per year is $ 4 0 , and the...
-
Estudio de factibilidad para una gasolinera. Puntos a mirar para el trabajo.
-
How do individual companies respond to economic forces throughout the globe? One way to explore this is to see how well rates of return for stock of individual companies can be explained by stock...
-
The present amount that is equivalent to an amount at a future time. True/false
-
Mendoza Corporation secured authorization from the state for 100,000 shares of $10 par value common stock. It has 80,000 shares issued and 70,000 shares outstanding. On June 5, the board of directors...
-
Rath School Supply Corporation was organized in 20xx. It was authorized to issue 200,000 shares of no-par common stock with a stated value of $5 per share, and 40,000 shares of $100 par value, 6...
Study smarter with the SolutionInn App