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Monthly excess return data are presented below for each of three stocks and the S&P index ( corrected for dividends ) for a 1 2
Monthly excess return data are presented below for each of three stocks and the S&P index corrected for dividends for a month period.
tableSecurity,MonthABCS&P
Calculate the following quantities:
a Alpha for each stock
b Beta for each stock
c The standard deviation of the residuals from each regression
d The correlation coefficient between each security and the market
e The average return on the market
f The variance of the market
Using the same data in Q
a Compute the mean return and variance of return for each stock using
i The singleindex model
ii The historical data
b Compute the covariance between each possible pair of stocks using
i The singleindex model
ii The historical data
c Compute the return and standard deviation of a portfolio constructed by placing onethird of your funds in each stock, using
i The singleindex model
ii The historical data
d Explain why the answers to parts ai and a are the same, while the answers to parts bi bii and ci and cii are different.
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