In: Finance
Consider the two (excess return) index-model regression results for stocks A and B. The risk-free rate over the period was 8%, 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% + 1.2(rM − rf) | 2% + 0.8(rM − rf) | |||||||||
R-square | 0.665 | 0.481 | |||||||||
Residual standard deviation, σ(e) | 11.8% | 20.6% | |||||||||
Standard deviation of excess returns | 23.1% | 27.9% | |||||||||
a. Calculate the following statistics for each stock: (Round your answers to 4 decimal places.)
Treynor measure: