Below, are Ally Corp's return over the prior 3 years, the market return over the prior...

Below, are Ally Corp's return over the prior 3 years, the market return over the prior 3 years, and the risk-free rate over the prior 3 years:

Year 1: Ally 11% Market 10% risk-free rate 1%

Year 2: Ally 13% Market -3% risk-free rate 2.4%

Year 3: Ally 21% Market 28% risk-free rate 1.6%

Please calculate Ally's CAPM alpha (alpha) by performing a market model regression of Ally's excess returns over the 3 year period on the market's excess returns over the period and providing the estimated intercept of the model.

Solutions

Expert Solution

Answer is Alpha (intercept) = 0.1047

Formulae

The direct formula for Beta is as above.

jeff jeffy answered 1 year ago

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