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Consider the two (excess return) index-model regression results for stocks A and B. The risk-free rate- market's average return was 14% Performance is measured using an index model regression on exce Index model regression estimates R-square Residual standard deviation, o(e) Standard deviation of excess returns L ii. iii. Alpha Information ratio Sharpe ratio Trevnor measure Stock A 1x + 1.2(M - rf) 0.665 11.8% 23.1% a. Calculate the following statistics for each stock (Round your answers to 4 decimal places.) % Answer is complete but not entirely correct. Stock A 1.0000 0.0833 0.4907 8.8330 Stock 8 2% + 0.8(FM-rf) Stock B 2.0000 % 0.0962 0.3373 10.5000 0.481 20.6% 27.9%

Consider the two (excess return) index-model regression results for stocks A and B. The risk-free rate- market's average return was 14% Performance is measured using an index model regression on exce Index model regression estimates R-square Residual standard deviation, o(e) Standard deviation of excess returns L ii. iii. Alpha Information ratio Sharpe ratio Trevnor measure Stock A 1x + 1.2(M - rf) 0.665 11.8% 23.1% a. Calculate the following statistics for each stock (Round your answers to 4 decimal places.) % Answer is complete but not entirely correct. Stock A 1.0000 0.0833 0.4907 8.8330 Stock 8 2% + 0.8(FM-rf) Stock B 2.0000 % 0.0962 0.3373 10.5000 0.481 20.6% 27.9%

Essentials Of Investments
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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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 14%. Performance is measured using an index model regression on excess returns Index model regression estimates R-square Residual standard deviation, o(e) Standard deviation of excess returns i ii. iii. iv. Alpha Information ratio Sharpe ratio Treynor measure Stock A 1x + 1.2(PM-rf) a. Calculate the following statistics for each stock: (Round your answers to 4 decimal places.) 0.665 11.8% 23.1% Text Answer is complete but not entirely correct. Stock A 1.0000 % 0.0833 0.4907 8.8330% Stock 8 2% + 0.8(rm- rf) Stock B 2.0000 % 0.0962 0.3373 10.5000% 0.481 20.6% 27.9% b. Which stock is the best choice under the following circumstances? i. This is the only risky asset to be held by the investor. ii. This stock will be mixed with the rest of the investor's portfolio, currently composed solely of holdings in the market-index fund. iii. This is one of many stocks that the investor is analyzing to form an actively managed stock portfolio.
Transcribed Image Text: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 14%. Performance is measured using an index model regression on excess returns Index model regression estimates R-square Residual standard deviation, o(e) Standard deviation of excess returns i ii. iii. iv. Alpha Information ratio Sharpe ratio Treynor measure Stock A 1x + 1.2(PM-rf) a. Calculate the following statistics for each stock: (Round your answers to 4 decimal places.) 0.665 11.8% 23.1% Text Answer is complete but not entirely correct. Stock A 1.0000 % 0.0833 0.4907 8.8330% Stock 8 2% + 0.8(rm- rf) Stock B 2.0000 % 0.0962 0.3373 10.5000% 0.481 20.6% 27.9% b. Which stock is the best choice under the following circumstances? i. This is the only risky asset to be held by the investor. ii. This stock will be mixed with the rest of the investor's portfolio, currently composed solely of holdings in the market-index fund. iii. This is one of many stocks that the investor is analyzing to form an actively managed stock portfolio.
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