Suppose that the index model for two Canadian stocks HD and ML is estimated with the following results: RHD =0.02+0.80RM+eHD R-squared =0.6 RML =-0.03+1.50RM+eML R-squared =0.4 σM =0.20 where M is S&P/TSX Comp

Suppose that the index model for two Canadian stocks HD and ML is estimated with the following results: RHD =0.02+0.80RM+eHD R-squared =0.6 RML =-0.03+1.50RM+eML R-squared =0.4 σM =0.20 where M is S&P/TSX Comp

MATLAB: An Introduction with Applications

6th Edition

ISBN:9781119256830

Author:Amos Gilat

Publisher:Amos Gilat

Chapter1: Starting With Matlab

Section: Chapter Questions

Problem 1P

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Question

INV 2-3b

Suppose that the index model for two Canadian stocks HD and ML is estimated with the following results:

R_HD =0.02+0.80R_M+e_HD

R-squared =0.6

R_ML =-0.03+1.50R_M+e_ML

R-squared =0.4

σ_M =0.20

where M is S&P/TSX Comp Index and R_X is the excess return of stock X.

b. What is the systematic risk of each stock?

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