Consider the two (excess return) index model regression results for A and B R A 1 5 1 3 R M R square 0 658 Residual standard deviation 13 2 R B 0 8 0 95 R M R square 0 596 Residual standard deviation 11 8 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 6 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 )

The Answer is in the image, click to view ...

Question: Consider the two (excess return) index model regression results for A and B : R A = 1.5% + 1.3 R M R -square =

Consider the two (excess return) index model regression results for A and B:

R_A = 1.5% + 1.3R_M

R-square = 0.658

Residual standard deviation = 13.2%

R_B = 0.8% + 0.95R_M

R-square = 0.596

Residual standard deviation = 11.8%

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 6.5% 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.)

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 Accounting Questions!

Consider the two (excess return) index model regression results for A and B. RA = -1.5% + 1.3RM R-square = 0.658 Residual standard deviation = 13.2% Rp = 0.8% + 0.95RM R-square = 0.596 Residual...

Consider the two (excess return) index model regression results for A and B: RA = 1.5% + 1.3RM R-square = 0.658 Residual standard deviation = 13.2% RB = 0.8% + 0.95RM R-square = 0.596 Residual...

Consider the two (excess return) index model regression results for A and B : R A = 1.5% + 1.3 R M R -square = 0.658 Residual standard deviation = 13.2% R B = 0.8% + 0.95 R M R -square = 0.596...

Consider the two (excess return) index model regression results for A and B: RA = 1.5% + 1.7RM R-square = 0.622 Residual standard deviation = 12% RB = -2.4% + 1.3Ry R-square = 0.468 Residual standard...

8. Consider the two (excess return) index model regression results for A and B: R = 1% +1.2RM R-square = .576 Residual standard deviation = 10.3% RB = -2% +.8RM R-square = .436 Residual standard...

Consider the two (excess return) index model regression results for A and B : R A = 1.5% + 1.7 R M R -square = 0.622 Residual standard deviation = 12% R B = 2.4% + 1.3 R M R -square = 0.468 Residual...

Consider the two (excess return) index model regression results for A and B. RA = 1.5% + 1.7RM R-square= 0.622 Residual standard deviation = 12% RB = -2.4% + 1.3R R-square = 0.468 Residual standard...

Consider the two (excess return) index model regression results for A and B: RA = 1.5% + 1.7RM R-square = 0.622 Residual standard deviation = 12% RB = 2.4% + 1.3RM R-square = 0.468 Residual standard...

Question 1: Question 2: Question 3 22 10 points Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA 2.8% +1.00RM + A RB 1% + 1.3RM + eB OM...

Consider the two (excess return) index model regression results for A and B RA = -1.9% + 1.9RM R-square 0.634 Residual standard deviation 12.4% RB 1.3% 1.1RM R-square 0.588 Residual standard...

You were just hired as the Inventory Manager for Bubble Snap, Inc., a small, merchandising startup. Bubble Snap currently uses a periodic inventory system, but it is considering changing to a...

How do changes in exchange rates and trade policy impact the balance of payments and the level of economic development in a country?

The value at time 0 of $ 1 6 , 5 0 0 to be received in 5 years where the discount rate is 5 percent, compounded semiannually, is $ q , . Calculate to two decimal points using the following PV...

P-1) (100 Pts.) A chemical manufacturing company (CMC) has a contract for the procurement of the neccssaly chemicals from four suppliers. The chemicals purchased from Supplier A are priced at $20...

(Appendices) UNCOLLECTIBLE ACCOUNT EXPENSE: AGING METHOD. Glencoe Supply had the following accounts receivable aging schedule at the end of a recent year: LO6

(Appendices) ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS. At the beginning of the year, Kullerud Manufacturing had a credit balance in its allowance for uncollectible accounts of $6,307. During the year...

(Appendices) SALES AND PURCHASE DISCOUNTS: GROSS AND NET METHODS. Sims Company regularly sells merchandise to Lauber Supply on terms 3/15, n/20. During a recent month, the two firms engaged in the...