Question
Youare giventhe following information: State of economy Return on stock A Retum on stock B Normal .109 -.052 Bear .108 .155 Bull .080 .240 Assume
Youare giventhe following information:
State of economy Return on stock A Retum on stock B
Normal .109 -.052
Bear .108 .155
Bull .080 .240
Assume each state of the economy is equally likely to happen.
Calculate the expected return of each stock. Stock A , Stock B
Calculate the standard deviation of each stock Stock A, Stock B
What is the covariance between the returns of the two stocks
What is the correlation between the returns of the two stocks?
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International Financial Management
Authors: Geert Bekaert, Robert J. Hodrick
2nd edition
013299755X, 132162768, 9780132997553, 978-0132162760
