Question
You have the following output of a regression for two stocks A and B: RA = 1%+1.2RM , R-square(A) = 0.575, Residual standard deviation (A)
You have the following output of a regression for two stocks A and B: RA = 1%+1.2RM , R-square(A) = 0.575, Residual standard deviation (A) = 10.3%, RB = 2% + 0.82RM , R-square(B) = 0.436, and Residual standard deviation (B) = 9.1%.
1.Which of these stocks has more firm-specific risk?
2.Which one is affected more by the market risk?
3.A greater portion of the return of which stock is explained by the market movements?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
To determine which stock has more firmspecific risk we can look at the residual standard deviation a...
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
Managerial Accounting
Authors: Karen W. Braun, Wendy M. Tietz
7th Edition
0137858515, 9780137858514
