You want to estimate the monthly alpha and beta of AXON stock, using the index model. Suppose AXON has a beta of 0.95 and a monthly alpha of 0.5 (representing half a percent). If you set up the regression model correctly, the index model equation should be (remember in index model formulas, we use R instead of r to denote excess returns): Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Rmarket 0.95 x Rstock +0.5 b Rmarket 0.5 x Rstock +0.95 n d Raxon = 0.5 x Rmarket +0.95 Raxon = 0.95 x Rmarket +0.5
You want to estimate the monthly alpha and beta of AXON stock, using the index model. Suppose AXON has a beta of 0.95 and a monthly alpha of 0.5 (representing half a percent). If you set up the regression model correctly, the index model equation should be (remember in index model formulas, we use R instead of r to denote excess returns): Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Rmarket 0.95 x Rstock +0.5 b Rmarket 0.5 x Rstock +0.95 n d Raxon = 0.5 x Rmarket +0.95 Raxon = 0.95 x Rmarket +0.5
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:You want to estimate the monthly alpha and beta of AXON stock, using the index model. Suppose AXON has a beta of 0.95 and a
monthly alpha of 0.5 (representing half a percent). If you set up the regression model correctly, the index model equation should
be (remember in index model formulas, we use R instead of r to denote excess returns):
Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer.
b
с
d
Rmarket =
Rmarket = 0.5 x Rstock +0.95
Raxon
0.95 x Rstock +0.5
=
0.5 x Rmarket +0.95
Raxon = 0.95 x Rmarket +0.5
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