Question
Suppose that the index model for stocks A and B is estimated from excess returns with the following results: R A = 2.8% + 1.00
| Suppose that the index model for stocks A and B is estimated from excess returns with the following results: |
| RA = 2.8% + 1.00RM + eA | |
| RB = 1.0% + 1.30RM + eB | |
| M = 18%; R-squareA = 0.27; R-squareB = 0.13 |
| Assume you create a portfolio Q, with investment proportions of 0.40 in a risky portfolio P, 0.35 in the market index, and 0.25 in T-bill. Portfolio P is composed of 70% Stock A and 30% Stock B. |
What is the standard deviation of portfolio Q?
| What is the "firm-specific" risk of portfolio Q?
|
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Extreme Events In Finance A Handbook Of Extreme Value Theory And Its Applications
Authors: Francois Longin
1st Edition
1118650190, 978-1118650196
