(Algo) Consider the two (excess return) Index-model regression results for stocks A and B. The risk-free rate over the period was 4%, and the market's average return was 11%. Performance is measured using an index model regression on excess returns. Index model regression estimates R-square Residual standard deviation, a(e) Standard deviation of excess returns Required: Stock A Stock B 1% +1.2(rm-r) 2% -0.8(PMP) 0.683 0.49 12.1% 20.9% 23.4% 28.5% a. Calculate the following statistics for each stock: b. Which stock is the best choice under the following circumstances? Complete this question by entering your answers in the tabs below. Required A Required B Calculate the following statistics for each stock: Note: Round your answers to 4 decimal places.
(Algo) Consider the two (excess return) Index-model regression results for stocks A and B. The risk-free rate over the period was 4%, and the market's average return was 11%. Performance is measured using an index model regression on excess returns. Index model regression estimates R-square Residual standard deviation, a(e) Standard deviation of excess returns Required: Stock A Stock B 1% +1.2(rm-r) 2% -0.8(PMP) 0.683 0.49 12.1% 20.9% 23.4% 28.5% a. Calculate the following statistics for each stock: b. Which stock is the best choice under the following circumstances? Complete this question by entering your answers in the tabs below. Required A Required B Calculate the following statistics for each stock: Note: Round your answers to 4 decimal places.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Problem 24-9 (Algo)
Consider the two (excess return) Index-model regression results for stocks A and B. The risk-free rate over the period was 4%, and the
market's average return was 11%. Performance is measured using an index model regression on excess returns.
Stock A
Stock B
Index model regression estimates
1% +1.2(rm -rf)
2% +0.8(FM-rf)
R-square
Residual standard deviation, o(e)
0.683
12.1%
0.49
20.9%
Standard deviation of excess returns
23.4%
28.5%
Required:
a. Calculate the following statistics for each stock:
b. Which stock is the best choice under the following circumstances?
Complete this question by entering your answers in the tabs below.
Required A Required B
Calculate the following statistics for each stock:
Note: Round your answers to 4 decimal places.
Alpha
ii. Information ratio
iii.
Sharpe ratio
iv. Treynor measure
Stock A
Stock B
%
%
<Required A
Required B >
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