Question
In: Finance
Assume you plot the monthly returns for a stock and also for the S&P 500. Using...
Assume you plot the monthly returns for a stock and also for the S&P 500. Using regression analysis, the straight line through these points that is developed by the analysis is referred to as the ______ which has a slope of _____ and an intercept of ______.
| A. |
characteristic line; alpha; beta |
|
| B. |
security market line; alpha; gamma |
|
| C. |
characteristic line; gamma; alpha |
|
| D. |
security market line; beta; gamma |
|
| E. |
characteristic line; beta; alpha |
Solutions
Expert Solution
Answer:- Option (E):- characteristic line; beta; alpha
Explanation:- Characteristic line is a straight line formed using regression analysis that summarizes a security's predicted excess return from the excess return of the market.
Slope: Beta - Sensitivity of security's returns
to market factor (the part due to movements in the overall
market)
Intercept: Alpha - Expected excess return of the
individual stock due to firm-specific factors (firm-specific
expected component)
jeff jeffy answered 2 years agoRelated Solutions
1. With the limited information below on monthly returns for a stock and the S&P 500...
1. With the limited information below on monthly returns for a
stock and the S&P 500 market index, what would you guess is
this stock's CAPM beta?
Month 1: Stock -7.4%, Market -2.0%
Month 2: Stock -4.0%, Market -4.0%
Month 3: Stock +2.2%, Market +0.5%
Month 4: Stock +13.4%, Market +10.8%
Group of answer choices:
a) Beta is greater than one
b) Beta is one
c) Beta is between zero and one
d) Beta is zero
e) Beta is negative...
Find below monthly levels of the S&P 500 Index and monthly Microsoft stock prices for the...
Find below monthly levels of
the S&P 500 Index and monthly Microsoft stock prices for the
last five years. Any dividends paid are acoounted for in the
closing monthly indices and prices. Follow the instructions below
to make estimations and to answer all questions.
Date
Adj Close S&P 500 Index
Adj Close MSFT Stock Price
Monthly Return S&P 500
Monthly Return MSFT
4/1/13
1597.57
29.09
5/1/13
1630.74
30.67
6/1/13
1606.28
30.56
7/1/13
1685.73
28.17
8/1/13
1632.97
29.56
9/1/13
1681.55
29.66...
Returns for a firm’s stock and the S&P 500 index for the last four years are...
Returns for a firm’s stock and the S&P 500 index for the
last four years are given in the table below. Estimate the firm’s
equity beta coefficient. Please show work.
First row is individual stock returns
second row is SP500 returns
Y1
Y2
Y3
Y4
-.01
.25
.18
.14
.03
.17
.12
.08
Risk and Return 1. Calculate monthly returns for Darden Restaurants and the S&P 500. Be sure...
Risk and
Return
1. Calculate monthly returns
for Darden Restaurants and the S&P 500. Be sure to include the
dividends for Darden in the return. Show All excel formulas.
Darden (DRI)
S&P 500
Month
Price
Dividend
Price
6/1/16
59.11
2098.86
DRI Return
SP Return
DRI- Ave
S&P - Ave
(DRI-Ave)x(S&P-Ave)
7/1/16
57.446472
0.56
2173.600098
8/1/16
58.043533
2170.949951
9/1/16
57.742203
2168.27002
10/1/16
61.009743
0.56
2126.149902
11/1/16
69.65522
2198.810059
12/1/16
69.10405
2238.830078
1/1/17
69.636215
0.56
2278.870117
2/1/17
71.520325
2363.639893
3/1/17
80.129959
2362.719971...
Risk and Return 1. Calculate monthly returns for Darden Restaurants and the S&P 500. Be sure...
Risk and
Return
1. Calculate monthly returns
for Darden Restaurants and the S&P 500. Be sure to include the
dividends for Darden in the return. Please show equations in
Excel.
Darden (DRI)
S&P 500
Month
Price
Dividend
Price
6/1/16
59.11
2098.86
DRI Return
SP Return
DRI- Ave
S&P - Ave
(DRI-Ave)x(S&P-Ave)
7/1/16
57.446472
0.56
2173.600098
8/1/16
58.043533
2170.949951
9/1/16
57.742203
2168.27002
10/1/16
61.009743
0.56
2126.149902
11/1/16
69.65522
2198.810059
12/1/16
69.10405
2238.830078
1/1/17
69.636215
0.56
2278.870117
2/1/17
71.520325
2363.639893
3/1/17
80.129959...
What is the average monthly return and standard deviation of returns for (i) S&P 500: Date...
What is the average monthly return and standard deviation of
returns for
(i) S&P 500:
Date
Adj Close
8/1/2015
1972.18
9/1/2015
1920.03
########
2079.36
########
2080.41
########
2043.94
1/1/2016
1940.24
2/1/2016
1932.23
3/1/2016
2059.74
4/1/2016
2065.3
5/1/2016
2096.95
6/1/2016
2098.86
7/1/2016
2173.6
8/1/2016
2170.95
9/1/2016
2168.27
########
2126.15
########
2198.81
########
2238.83
1/1/2017
2278.87
2/1/2017
2363.64
3/1/2017
2362.72
4/1/2017
2384.2
5/1/2017
2411.8
6/1/2017
2423.41
7/1/2017
2470.3
8/1/2017
2471.65
9/1/2017
2519.36
########
2575.26
########
2584.84
########
2673.61
1/1/2018
2823.81
2/1/2018
2713.83...
Will the stock market get positive returns? (as represented by the S&P 500 index) Yes or...
Will the stock market get positive returns? (as represented by
the S&P 500 index)
Yes or No
The S&P 500, or simply the S&P, is a stock market index that measures the stock...
The S&P 500, or simply the S&P, is a stock market index
that measures the stock performance of 500 large companies listed
on stock exchanges in the United States.
define an adequate investment strategy, and select the assets
they would invest to start with.
-the potential customer profile specifications (SAP 500),
-the portfolio objectives
-the investment policies (strategic allocation)
-The choice and justification of a benchmark
-a trial portfolio based on the team investment guidelines
-a brief evaluation on each...
Historically the S&P 500 Stock Index has returned about 8% a year but returns are very...
Historically the S&P
500 Stock Index has
returned about 8% a year but returns are very
uneven as recent experience has reminded us - the INDEX
declined by more than 50% from its peak in
2007 and took 7 years to attain
that peak level again. This year (2019) the S & P 500
Index has gained about 10% through today’s date after
declining almost 10% for last year( 2018). It has since recovered.
In contrast a typical Money Market...
You are contemplating investments in the stock of Clorox and in the S&P 500 index (a...
You are contemplating investments in the stock of Clorox and in
the S&P 500 index (a collection of stocks approximately
representing the overall market). The Clorox required return
(calculated using the capital asset pricing model or CAPM) is 18%,
the Clorox beta is .95, and its bonds are rated A. The standard
deviation of returns for Clorox stock is 14%. Its payout ratio is
65% and its sales are expected to grow by 7% during the next year.
The S&P...
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