Question text

The regression yields an intercept, equal to -.02 and a beta equal to 1.2. The standard error of the alpha is .09. The average returns for the risk-free asset, the stock, and the market index are .05, .15, and .10 respectively. The standard deviations (based on excess returns) for the stock and the market index are .20 and .30 respectively. What should your conclusion be on the stock's performance based on Jensen measure?

Select one:

a. CDF stock underperformed the market portfolio.

b. CDF stock outperformed the market portfolio.

c. CDF stock did not either outperform or under-perform the market portfolio. That is , the stock had normal performance.