Question: Consider the two (excess return) index model regression results for A and B : R A = 0.9% + 1.1 R M R -square =

Consider the two (excess return) index model regression results for A and B: R_A = 0.9% + 1.1R_M R-square = 0.590 Residual standard deviation = 11% R_B = 1.4% + 0.6R_M R-square = 0.456 Residual standard deviation = 9.2% 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 4.4% 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.)

Intercept ______%

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