Consider the two (excess retur

 

 Consider the two (excess return) index-model regression results for stocks A and B. The risk-free rate over the period was 6%, and the market’s average return was 14%.Performance is measured using an index model regression on excess returns.

 

Stock A

Stock B

Index model regression estimates 1% _ 1

R-square .576 .436

Residual standard deviation, _(e)

Standard deviation of excess returns

1% _ 1.2(rM _ rf)

.576

10.3%

21.6%

2% _ .8(rM _ rf)

.436

19.1%

24.9%

 

a. Calculate the following statistics for each stock:

i. Alpha.

ii. Appraisal ratio.

iii. Sharpe measure.

iv. Treynor measure.

b. Which stock is the best choice under the following circumstances?

i. This is the only risky asset to be held by the investor.

ii. This stock will be mixed with the rest of the investor’s portfolio, currently composed  solely of holdings in the market index fund.

iii. This is one of many stocks that the investor is analyzing to form an actively managed stock portfolio.

 

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Posted in Uncategorized

Consider the two (excess retur

Consider the two (excess return) index-model regression results for stocks A and B.

The risk-free rate over the period was 6%, and the market’s average return was 14%. Performance is measured using an index model regression on excess returns.

a. Calculate the following statistics for each stock:

i. Alpha.

ii. Appraisal ratio.

iii. Sharpe measure.

iv. Treynor measure.

b. Which stock is the best choice under the following circumstances?

i. This is the only risky asset to be held by the investor.

ii. This stock will be mixed with the rest of the investor’s portfolio, currently composed solely of holdings in the market index fund.

iii. This is one of many stocks that the investor is analyzing to form an actively managed stock portfolio.

Place this order or similar order and get an amazing discount. USE Discount code “GET20” for 20% discount

Posted in Uncategorized