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Consider the two excess return index model regression results for A and B RA 1% 1.2 RM R square 576 Residual standard deviation

Consider the two (excess return) index model regression results for A and B: RA = 1% + 1.2 RM R -square _ .576 Residual standard deviation = 10.3% RB = - 2% + .8 RM R -square = .436 Residual standard deviation = 9.1% a. Which stock has more firm-specific risk? b. Which has greater market risk? c. For which stock does market movement explain a greater fraction of return variability? d. If r f were constant at 6% and the regression had been run using total rather than excess returns, what would have been the regression intercept for stock A?

Apr 01 2020 View more View Less

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