Question
You are assigned to evaluate the performance of the CDF stock. You collect the past data on the risk-free assets, the stock, and the market
You are assigned to evaluate the performance of the CDF stock. You collect the past data on the risk-free assets, the stock, and the market index. You use the excess returns of the stock and the market index to run the regression. The regression yields an intercept, equal to -.02 and a beta equal to 1.2. The standard error of the alpha is .09. The average returns for the risk-free asset, the stock, and the market index are .05, .15, and .10 respectively. The standard deviations (based on excess returns) for the stock and the market index are .20 and .30 respectively. What should your conclusion be on the stocks performance based on Jensen measure?
Select one:
a. CDF stock underperformed the market portfolio.
b. CDF stock outperformed the market portfolio.
c. CDF stock did not either outperform or under-perform the market portfolio. That is , the stock had normal performance.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started