Question
Stock A has a market beta of 1.5, and stock B has a market beta of 0.8. If the market realizes a return of 2%
Stock A has a market beta of 1.5, and stock B has a market beta of 0.8.
If the market realizes a return of 2% over a the last 5 days:
What is the expected return of stock A over the same period predicted by the single index model? If stock A instead realized a return of 2.5%, what is the alpha of stock A over that period?
If the market realizes a return of -1% over a certain period: What is the expected return of stock B over the same period predicted by the single index model ? If stock B instead realized a return of 1%, what is the alpha of stock B over that period?
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