Consider the two (excess return) index model regression results for A and B. RA= 0.9% + 1.1RM , R-square = 0.590, and Residual Standard Deviation = 11% RB= -1.4% + 0.6RM, R-square = 0.456, and Residual Standard Deviation = 9.2% Which stock has more firm-specific risk, market risk, and greater fraction of return variability for market movement? Also, if rf were constant at 4.4% and the regression had been run using total rather than excess returns, what would have been the regression intercept for stock A (write as percentage, rounded to 2 decimal places)?
Consider the two (excess return) index model regression results for A and B. RA= 0.9% + 1.1RM , R-square = 0.590, and Residual Standard Deviation = 11% RB= -1.4% + 0.6RM, R-square = 0.456, and Residual Standard Deviation = 9.2% Which stock has more firm-specific risk, market risk, and greater fraction of return variability for market movement? Also, if rf were constant at 4.4% and the regression had been run using total rather than excess returns, what would have been the regression intercept for stock A (write as percentage, rounded to 2 decimal places)?
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter2: Risk And Return: Part I
Section: Chapter Questions
Problem 12MC
Related questions
Question
Consider the two (excess return) index model regression results for A and B.
RA= 0.9% + 1.1RM , R-square = 0.590, and Residual Standard Deviation = 11%
RB= -1.4% + 0.6RM, R-square = 0.456, and Residual Standard Deviation = 9.2%
Which stock has more firm-specific risk, market risk, and greater fraction of return variability for market movement? Also, if rf were constant at 4.4% and the regression had been run using total rather than excess returns, what would have been the regression intercept for stock A (write as percentage, rounded to 2 decimal places)?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 5 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning