You have the following output of a regression for two stocks A and B: RA = 1%+1.2RM , R-square(A) =

You have the following output of a regression for two stocks A and B: RA = 1%+1.2RM , R-square(A) =

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You have the following output of a regression for two stocks A and B: RA = 1%+1.2RM , R-square(A) =
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You have the following output of a regression for two stocks A and B: RA = 1%+1.2RM , R-square(A) = 0.575, Residual standard deviation (A) = 10.3%, RB = 2% + 0.82RM , R-square(B) = 0.436, and Residual standard deviation (B) = 9.1%.1.Which of these stocks has more firm-specific risk?2.Which one is affected more by the market risk?3.A greater portion of the return of which stock is explained by the market movements?

Expert Answer:

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To determine which stock has more firm specific risk we can look at the residual standard deviation
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