Question
1. a. Please estimate and plot the SML that can be constructed using the data contained inSML_data.xls. The data file contains data on six individual
1. a. Please estimate and plot the SML that can be constructed using the data contained inSML_data.xls. The data file contains data on six individual stocks' excess returns for a period. Italso contains excess return data for a market index (SP500) for the same period. Does the estimated SML indicate statistically significant risk return trade-off relationship? Explain. Please present the related regression table.[9 Marks]
b. What is the firm-specific risk exposure of AMR? Do the necessary estimation and make your conclusion. Please provide detailed explanation. Please present the related regression table.[5 Marks]
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International Finance Theory and Policy
Authors: Paul R. Krugman, Maurice Obstfeld, Marc J. Melitz
10th edition
978-0133425895, 133425894, 978-0133423631, 133423638, 978-0133423648
