Question: Problem 18.2 (f) Consider the two (excess return) index-model regression results for stocks A and B. The risk-free rate over the period was 6%, and

Problem 18.2 (f) Consider the two (excess return) index-model regression results

Problem 18.2 (f) 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 market's average return was 15%. Performance is measured using an index model regression on excess returns. Stock A Stock B Index model regression estimates 18 + 1.211M -'f 28 + 0.81M - rf R-square 0.594 0.445 Residual standard deviation, oe) 19.4% Standard deviation of excess returns 10.6% 21.98 25.58 Is Stock A the best choice in the following scenario: This stock will be mixed with the rest of the investor's portfolio, currently composed solely of holdings in the market-index fund. O Yes O No

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