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. 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(FM-r) 0.683 12.1% 23.4% 0.49 20.9% 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. i. Alpha ii. Information ratio iii. Sharpe ratio iv. Treynor measure Stock A Stock B % %
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. 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(FM-r) 0.683 12.1% 23.4% 0.49 20.9% 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. i. Alpha ii. Information ratio iii. Sharpe ratio iv. Treynor measure Stock A Stock B % %
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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.
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(FM-r)
0.683
12.1%
23.4%
0.49
20.9%
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.
i. Alpha
ii. Information ratio
iii.
Sharpe ratio
iv. Treynor measure
Stock A
Stock B
%
%
<Required A
Required B >
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