Question
Suppose that the index model for stocks A and B is estimated from excess returns with the following results: R A = 4.0% + 0.50
Suppose that the index model for stocks A and B is estimated from excess returns with the following results:
RA = 4.0% + 0.50RM + eA
RB = 1.2% + 0.70RM + eB
M = 17%; R-squareA = 0.26; R-squareB = 0.18
What are the covariance and correlation coefficient between the two stocks? (Do not round intermediate calculations. Calculate using numbers in decimal form, not percentages. Round your answers to 4 decimal places.)
Covariance:
Correlation coefficient:
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Horngrens Accounting
Authors: Tracie Miller Nobles, Brenda Mattison, Ella Mae Matsumura, Carol A. Meissner, Jo Ann Johnston, Peter R. Norwood
11th Canadian Edition Volume 2
9780135359785
