Consider the two (excess return) index model regression results for A and B R A 1 1 1 7 R M R square 0 682 Residual standard deviation 14 R B 0 4 1 4 R M R square 0 576 Residual standard deviation 12 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 8 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 = 1.1% + 1.7 R M R -square =

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

R_A = 1.1% + 1.7R_M

R-square = 0.682

Residual standard deviation = 14%

R_B = 0.4% + 1.4R_M

R-square = 0.576

Residual standard deviation = 12.5%

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 8% 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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