Question
Suppose the index model for stocks A and B is estimated from excess returns with the following results: R A = 2 % + 0,70
Suppose the index model for stocks A and B is estimated from excess returns with the following results:
| R A = 2 % + 0,70 R M + e A | |
| R B = –1,8 % + 0,90 R M + e B | |
| σM = 22%; R -squared A = 0.20; R -squared B = 0.15 |
What are the covariance and correlation coefficient between the two stocks? ( Calculate using numbers in decimal form, not percentages. Do not round intermediate calculations. Round your answers to 4 decimal places . ) |
| covariance | |
| Correlation coefficient | |
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Investments
Authors: Zvi Bodie, Alex Kane, Alan J. Marcus
9th Edition
73530700, 978-0073530703
