Question

Problem 24-9 Consider the two (excess return) index-model regression results for stocks A and B. The risk-free rate over the period was 8%, and the market's average return was 13%. Performance is measured using an index model regression on excess returns. points Index model regression estimates 10 + re) Stock A 1.2(y- 0.659 11.78 238 Stock B 20 + 0.8(EM - 0.478 F Residual standard deviation, die Standard deviation of excess returns a. Calculate the following statistics for each stock (Round your answers to 4 decimal places.) Stock A Stock B % % Alpha Information ratio Sharpe ratio Treynor measure w b. Which stock is the best choice under the following circumstances? This is the only to be held by the investor This stock will be moved with the rest of the investorsport , currently composed of holdings in the marketindex fund This is one of many stocks that the investor is analying to form an actively managed stock portfolio

Answer 1

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