The three symbols which need to be calculated are Alpha, Beta and Standard Deviation respectively
Alpha = Expected Return of Stock - Expected Return of Market
For Stock A = 0.01 - 0.06 = -0.05
For Stock B = 0.11 - 0.06 = 0.05
Beta = Co-variance (Stock, Market) / Variance (Market)
For Stock A = 0/0.12 = 0
For Stock B = 0.12/0.12 = 1
Standard Deviation = square root of variance
For Stock A = Square root of 0.1 = 0.316228
For Stock B = Square root of 0.22 = 0.469042
Exercise 2. Suppose there exists two stocks, A and B, and the market index, M. Suppose...
The index model has been estimated for stocks A and B with the following results: RA= 0.12 +0.650RM + EA RB=0.04 + 1.480 RM+ eB OM=0.310 Olex) = 0.20 Oleg) = 0.10 What is the covariance between each stock and the market index? (Round your answers decimal places.) Stock A covariance Stock B covariance
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
Suppose that the index model for stocks A and B is estimated from excess returns with the following results: Ra : 3% + 0.7 Rm + ea Rs--2% + 1.2 Rm + eb What is the standard deviation for each stock? Break down the variance of each stock to the systematic and firm-specific components What are the covariance and correlation coefficient between the two stocks? What is the covariance between each stock and the market index? Are the intercepts of...
2. Suppose that the index model for stocks A and B is estimated from excess returns with the following results: R. 396 + 0.7 Rmte, Rs:-2% + 1.2 Rm+eb Ơn® 20%; R-SQRas 0.20;R-SQRb 0.12 What is the standard deviation for each stock? Break down the variance of each stock to the systematic and firm-specific components. What are the covariance and correlation coefficient between the two stocks? What is the covariance between each stock and the market index? Are the intercepts...
The index model has been estimated for stocks A and B with the following results. a) What is the covariance between returns on stocks A and B? b) What is the standard deviation of stock A? RA= 0.05 + 0.45 * RM + eA RB = 0.06 + 0.77 * RM + eB σM = 0.32; σeA = 0.2; σeB = 0.1. Please show work and round the answers to 4 decimal places.
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
Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA - 1.8% + 0.75RM + EA RB = -2.0% + 1.1RM + eB OM - 23%; R-squareA - 0.18; R-squares - 0.10 What is the standard deviation of each stock? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Standard Deviation Stock A Stock B
Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA = 3% + 0.7RM + eA & RB = –2% + 1.2RM + eB σM = 20%; R-squareA = 0.20; R-squareB = 0.12 Assume you create portfolio P with investment proportions of 0.60 in A and 0.40 in B. 1. What is the standard deviation of the portfolio? 2. What is the beta of your portfolio? 3. What is the...
The index model has been estimated for stocks A and B with the following results: RA = 0.01 + 0.8RM + eA. RB = 0.02 + 1.1RM + eB. σM = 0.30 σ(eA) = 0.20 σ(eB) = 0.10. The covariance between the returns on stocks A and B is Select one: a. 0.0384. b. 0.0406. c. 0.1920. d. 0.0050. e. 0.0792.
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...