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QUESTION 19 The index model for stocks A and B is estimated from excess returns with the following results: R A = 0.03 + 0.7R

QUESTION 19

The index model for stocks A and B is estimated from excess returns with the following results:

R_A= 0.03 + 0.7R_M+ e_A

R_B= -0.02+ 1.2R_M+ e_B

_M= 0.2; R-Square_A= 0.2; R-Square_B= 0.12

Which stock return can the index model describe better?

A.
stock A

B.
stock B

C.
Cannot tell

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QUESTION 19 The index model for stocks A and B is estimated from excess returns with the following results: R A = 0.03 + 0.7R

QUESTION 19 The index model for stocks A and B is estimated from excess returns with the following results: RA = 0.03 + 0.7RM + eA RB = -0.02+ 1.2RM + eB M = 0.2; R-SquareA = 0.2; R-SquareB = 0.12 Which stock return can the index model describe better? A. stock A B. stock B C. Cannot tell

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QUESTION 19

The index model for stocks A and B is estimated from excess returns with the following results:

R_A= 0.03 + 0.7R_M+ e_A

R_B= -0.02+ 1.2R_M+ e_B

_M= 0.2; R-Square_A= 0.2; R-Square_B= 0.12

Which stock return can the index model describe better?

A.
stock A

B.
stock B

C.
Cannot tell