Question: Consider the two (excess return) index model regression results for stocks TM and BMW: Row=1%+1.2R R?=0.576 Remw =-2%+0.8Ry R=0.436 Residual Standard Deviation (TM)=10.3% Residual Standard

Consider the two (excess return) index model regression results for stocks TM and BMW: Row=1%+1.2R R?=0.576 Remw =-2%+0.8Ry R=0.436 Residual Standard Deviation (TM)=10.3% Residual Standard Deviation (BMW)=9.1% a. Which stock has more specific risk? [5 marks] b. Which stock has greater market risk? [5marks] c. For which stock does market movement explain a greater fraction of return variability? [5 marks] d. If r, were constant at 6% and the regression had been run using total rather than excess returns, what would have been the regression intercept for stock TM? [10 marks]

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Consider the two (excess return) index model regression results for A and B: RA = 0.12 + 1.29RM R square= 0.576 Residual standard deviation = 10.3% RB = -0.02 + 0.86RM R square= 0.436 Residual...

Consider the two ( excess return ) index model regression results for A and B: Ra = 1 % + 1 . 2 Rm R - square = 0 . 5 7 6 Residual standard deviation = 1 0 . 3 % Rb = 2 % + 0 . 8 Rm R - square = 0 ....

Question 7 1 pts Consider the two (excess return) index model regression results for A and B: RA = 0.06 +1.18RM R square= 0.576 Residual standard deviation = 10.3% RB = -0.02 +0.84RM R square=0.436...

Consider the two (excess return) index model regression results for A and B: RA = 0.08 + 1.28RM R square= 0.576 Residual standard deviation = 10.3% RB = -0.02 + 0.72RM R square= 0.436 Residual...

Consider the two (excess return) index model regression results for A and B: RA = 0.12 + 1.29RM R square= 0.576 Residual standard deviation = 10.3% RB = -0.02 +0.86RM. R square= 0.436 Residual...

Consider the two (excess return) index model regression results for A and B: RA = 0.07 + 1.31RM R square= 0.576 Residual standard deviation = 10.3% RB = -0.02 + 0.77RM R square= 0.436 Residual...

& Consider the two (excess return) index model regression results for stocks AB and BC. The risk free rate over the period was 6e, and the market's average retum was 14%. Performance is mea- sured...

Consider the two (excess return) index model regression results for stocks A and B. The risk- free rate over the period was 6%, and the market average return was 14%. Performance is measured using...

3 6 . Consider the two ( excess return ) index model regression results for A and B: RA = 1 % + 1 . 2 RM R - square = 0 . 5 7 6 Residual standard deviation = 1 0 . 3 % RB = 2 % + 0 . 8 RM R - square...

Consider the two (excess return) index model regression results for A and B: RA = 1% + 1.6RM +eA R squared= 0.576 Residual standard deviation = 10.3% RB = 2% + 0.8RM+eB R squared= 0.436 Residual...

For which sample (i or ii) would you expect the SD of heights to be larger? Or, would they be about the same? (a) (i) A sample of 10 women ages 18-24, or (ii) a sample of 100 women ages 18-24. (b)...

A fan is to accelerate quiescent air to a velocity to 12 m/s at a rate of 3 m3/s. If the density of air is 1.15 kg/m3, the minimum power that must be supplied to the fan is (a) 248 W (b) 72 W (c) 497...

Which of the following is an Internet - specifio measure that is used by companies? recall tesis retention resis asles return on investment ( ROI ) cost per conversion

On 1 March 2007 DB Limited issued R560 000 15% debentures at R98. The debentures were to be redeemed at par in four equal annual payments starting 28 February 2010. Required: Journalise the above...