Variance of A^2=Beta A^2*Standard Deviation of M^2/Rx^2
=0.650^2*0.310^2/0.20=20.30113%
Standard Deviation of A =20.30113%^0.5
Standard Deviation of B^2=Beta B^2*Standard Deviation of M^2/Ry^2
=1.480^2*0.310^2/0.10 =210.4974%
Standard Deviation=210.4974%^0.5
Covariance of Stock A with Market =R*Standard deviation of A
*Standard Deviation of M =0.20^0.5*20.30113%^0.5*0.310=0.0625
Covariance of Stock B with Market =R*Standard deviation of B
*Standard Deviation of M =0.10^0.5*210.4974%^0.5
*0.310 =0.1422
The index model has been estimated for stocks A and B with the following results: RA=...
The index model has been estimated for stocks A and B with the following results: RA 0.12 +0.610 RM+eA RB 0.04 1.416 RM+ eB OM-0.270 O(eA) 0.20 O(eB) 0.10 What is the correlation coefficient between the two stocks? (Round your answer to 4 decimal places.) Correlation coefficient
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Additional Problem 8-4 The index model has been estimated for stocks A and B with the following results: RA= 0.12 +0.695RM + eA RB= 0.04 + 1.552RM+ EB om=0.355 (EA) = 0.20 O(EB) = 0.10 What is the correlation coefficient between the two stocks? (Round your answer to 4 decimal places.) Correlation coefficient
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Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA = 2.5% + 0.60RM + eA RB = -1.5% + 0.7RM + eB σM = 19%; R-squareA = 0.24; R-squareB = 0.18 What is the covariance between each stock and the market index? (Calculate using numbers in decimal form, not percentages. Do not round your intermediate calculations. Round your answers to 3 decimal places.)
Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA = 2.5% + 0.60RM + EA RB = -1.5% + 0.7 RM + EB OM = 19%; R-square A = 0.24; R-squares = 0.18 Break down the variance of each stock to the systematic and firm-specific components. (Do not round intermediate calculations. Calculate using numbers in decimal form, not percentages. Round your answers to 4 decimal places.) Risk for A...
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