Question: Consider the two (excess return) index model regression results for A and B : R A = 1.5% + 1.7 R M R -square =

Consider the two (excess return) index model regression results for A and B: R_A = 1.5% + 1.7R_M R-square = 0.622 Residual standard deviation = 12%

R_B = 2.4% + 1.3R_M R-square = 0.468 Residual standard deviation = 9.8% a. Which stock has more firm-specific risk?

multiple choice 1

Stock A

Stock B

b. Which stock has greater market risk? multiple choice 2

Stock A

Stock B

c. For which stock does market movement has a greater fraction of return variability? multiple choice 3

Stock A

Stock B

d. If r_f were constant at 5.5% and the regression had been run using total rather than excess returns, what would have been the regression intercept for stock A? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.)

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