Use the formula (below). What does it measure? If an asset has a positive alpha, where would it plot with respect to the SML? What is the financial interpretation of the residuals in the regression?

4. Compute the beta for each of the stocks using 12, 36, and 60 months. Are there any differences? If so, why? Compare the results you obtained for 36 months with those available online. Are there any differences? If so, why?

5. Use the formula RtRft=i+i[RMtRft]+t to estimate the value of using a regression. Here Rt is the return on the stock and Rft is the risk-free rate for the same period. RMt is the return on a stock market index (in this case the S\&P 500 index). i is the regression intercept, and i is the slope (and the stock's estimated beta). represents the residuals for the regression. The intercept, i, is often called simply "the alpha". What does it measure? If an asset has a positive alpha, where would it plot with respect to the SML? What is the financial interpretation of the residuals in the regression