8. Consider the two (excess return) index model regression results for A and B:

R R R

A
 M

1% 1.2

-square .576 Residual standard deviation 10 3

-square Resi

 

. %

% .

.

R R R

B 2 8 M 436 dual 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?