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1. Which stock has higher firm-specific risk? Which stock has greater market (systematic) risk? For which stock does the market movement explain a greater fraction

1. Which stock has higher firm-specific risk? Which stock has greater market (systematic) risk? For which stock does the market movement explain a greater fraction of return variability? Explain. image text in transcribed
Question 6 (20 points) The single-index model has been estimated for stocks A and B with the following results: RA= 0.01+0.8RM+ eA, R-square-0.25 RB- 0.02 1.2RM+ eB, R-sqaure=0.40 M 0.20, (eA) -0.20, (es ) - 0.10 121

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