Question
Suppose that the index model for stocks A and B is estimated from excess returns with the following results: R A = 2.5% + 0.95
Suppose that the index model for stocks A and B is estimated from excess returns with the following results:
| RA = 2.5% + 0.95RM + eA | |
| RB = 1.8% + 1.10RM + eB | |
| M = 27.0%; R-squareA = 0.23; R-squareB = 0.11 |
| What is the covariance between each stock and the market index? (Calculate using numbers in decimal form, not percentages. Do not round your intermediate calculations. Round your answers to 3 decimal places.) |
| Covariance | |
| Stock A | |
| Stock B |
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World Finance Since 1914
Authors: Paul Einzig
1st Edition
0415539471, 978-0415539470
