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 markets average return was 15%. Performance is measured using an index model regression on excess returns. What is the Information Ratio of each stock? Stock A Stock B Index model regression estimates 0.5% + 1.1(Rm - Rf) 0.8% + 0.9(Rm - Rf)

R-square

0.594 0.445

Residual standard deviation 5.60% 9.40%

Standard deviation of excess returns 16.90% 19.50% A) 0.030 for Stock A; 0.041 for Stock B B) 0.089 for Stock A; 0.085 for Stock B C) -0.982 for Stock A; -0.553 for Stock B D) -0.325 for Stock A; -0.267 for Stock B