Question: Q#4: Consider the two (excess return) index model regression results for A and B: =%+. R-square = .576 Residual standard deviation = 10.3%=%+.R-square = .436

Q#4: Consider the two (excess return) index model regression results for A and B: =%+. R-square = .576 Residual standard deviation = 10.3%=%+.R-square = .436 Residual standard deviation = 9.1%

a. Which stock has more firm-specific risk?

b. Which has greater market risk?

c. For which stock does market movement explain a greater fraction of return variability?

d. If rf were constant at 6% and the regression had been run using total rather than excess returns, what would have been the regression intercept for stock A?

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