Question
The index model has been estimated for stocks A and B with the following results: RA= -0.06 + 0.85RM+ eA RB= 0.03 + 2.95RM+ eB
The index model has been estimated for stocks A and B with the following results: RA= -0.06 + 0.85RM+ eA RB= 0.03 + 2.95RM+ eB The standard deviation of the market index is 18%; the residual standard deviation of the error terms for stock A is 44%; the residual standard deviation of the error terms for stock B is 35%. What is the covariance between the returns on stocks A and B? Enter your answer rounded to two decimal places. Do not enter % in the answer box. For example, if your answer is 0.12345 or 12.345% then enter as 12.35 in the answer box.
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