Consider the two (excess return) index-model regression results for stocks A and B. The risk-free rate over the period was 7%, and the markets average return was 15%. Performance is measured using an index model regression on excess returns.

	Stock A	Stock B
Index model regression estimates	1% + 1.2(rM rf)	2% + 0.8(rM rf)
R-square	0.641	0.469
Residual standard deviation, (e)	11.4%	20.2%
Standard deviation of excess returns	22.7%	27.1%

a. Calculate the following statistics for each stock: (Round your answers to 4 decimal places.)

b. Which stock is the best choice under the following circumstances?

Consider the two (excess return) index-model regression results for stocks A and B. The risk-free rate over the period was 7%, and the market's average return was 15%. Performance Is measured using an index model regression on excess returns Stock A % + 1.2(rH-rf) 0.641 11.4% 22.7% Stock B + 0.8(rM-rf) 2% Index model regression estimates R-square Residual standard deviation, (e) Standard deviation of excess returns 0.469 20.2% 27, 1% a. Calculate the following statistics for each stock: (Round your answers to 4 decimal places.) Stock A Stock B i. Alpha ii. l Information ratio ii. Sharpe ratio iv. Treynor measure b. Which stock is the best choice under the following circumstances? i. This is the only risky asset to be held by the investor. i This stock will be mixed with the rest of the investor's portfolio, currently composed solely of holdings in the ii. This is one of many stocks that the investor is analyzing to form an actively managed stock portfolio market-index fund