Question
Break down the variance of each stock to the systematic and firm-specific components. Stock Stock A Stock B Systematic Variance Firm-specific Variance Total Variance Systematic
Break down the variance of each stock to the systematic and firm-specific components.
Stock | Stock A | Stock B |
Systematic Variance | ||
Firm-specific Variance | ||
Total Variance | ||
Systematic Risk % (R2) |
R(A)= 3%+.7R(m)+e(A)
R(B)= -2%+1.2R(m)+e(B)
(M)=20%;RSquared(A)=.20;RSquared(B)=.12
Can someone please explain? And are Systematic Risk and Systematic Variance the same? How can I calculate the Total Variance also? I am a little confused and we are not allowed to use excel to solve.. All work needs to be shown unfortunately. From what I understand, to find the Total Variance, you have to add the systematic risk with the Unsystematic. Where is that? Is risk=variance? Always written as a percentage?
Please help....
I am getting the following...
Systematic Var(A)=196;Stematic Var(B)=576
FirmSpecif(A)=784;FirmSpecif(B)=4224
Total Var..... NO CLUE FOR BOTH
SYSTEM RISK%(RSquared) (A)=280; (B)=480
is this correct?
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