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 )

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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.)

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