Question: Consider the two (excess return) index model regression results for A and B: RA = 1.2% + 1.5RM R-square = 0.612 Residual standard deviation =

Consider the two (excess return) index model regression results for A and B: RA = 1.2% + 1.5RM R-square = 0.612 Residual standard deviation = 11.5% RB = 1.8% + 0.9RM R-square = 0.476 Residual standard deviation = 9.5%

a. Which stock has more firm-specific risk?

Stock A

Stock B

b. Which stock has greater market risk?

Stock A

Stock B

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

Stock A

Stock B

d. If r_f were constant at 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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