Question
Consider the two (excess return) index-model regression results for stocks A and B . The risk-free rate over the period was 5%, and the markets
Consider the two (excess return) index-model regression results for stocks A and B. The risk-free rate over the period was 5%, and the markets average return was 15%. Performance is measured using an index model regression on excess returns.
Stock A | Stock B | |
---|---|---|
Index model regression estimates | 1% + 1.2(rM rf) | 2% + 0.8(rM rf) |
R-square | 0.617 | 0.457 |
Residual standard deviation, (e) | 11% | 19.8% |
Standard deviation of excess returns | 22.3% | 26.3% |
Required:
a. Calculate the following statistics for each stock: (Do not round intermediate calculations. Round your answers to 4 decimal places.)
Consider the two (excess return) index-model regression results for stocks A and B. The risk-free rate over the period was 5%, and the markets average return was 15%. Performance is measured using an index model regression on excess returns.
Stock A | Stock B | |
---|---|---|
Index model regression estimates | 1% + 1.2(rM rf) | 2% + 0.8(rM rf) |
R-square | 0.617 | 0.457 |
Residual standard deviation, (e) | 11% | 19.8% |
Standard deviation of excess returns | 22.3% | 26.3% |
Required:
a. Calculate the following statistics for each stock: (Do not round intermediate calculations. Round your answers to 4 decimal places.)
i. Alpha for stock A and stock B
ii. Information ratio for stock A and stock B
iii. Sharpe ratio for stock A and stock B
iv. Treynor measure for stock A and stock B
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