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An index model regression applied to past monthly returns in Ford's stock price produces the following estimates, which are believed to be stable over time:
An index model regression applied to past monthly returns in Ford's stock price produces the following estimates, which are believed to be stable over time: rf = 0.10% + 1.1rm If the market index subsequently rises by 8% and Ford's stock price rises by 7%, what is the abnormal change in Ford's stock price? (Negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 1 decimal place.) Abnormal return In a recent closely contested lawsuit, Apex sued Bpex for patent infringement. The jury came back today with its decision. The rate of return on Apex was ra= 3.1%. The rate of return on Bpex was only r8 = 2.5%. The market today responded to very encouraging news about the unemployment rate, and ru= 3%. The historical relationship between returns on these stocks and the market portfolio has been estimated from index model regressions as: Apex: ra = 0.2% + 1.4rm Bpex: rb = -0.1% + 0.6rm a. What is the predicted returns for Apex & Bpex? (Do not round intermediate calculations. Round your answers to 1 decimal place.) Predicted Returns Apex Bpex
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