9. 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% + 1.2(rM - r) 2% + 0.8(rM – r) R-square 0.576 0.436 Residual standard deviation, o(e) 10.3% 19.1% Standard deviation of excess returns 21.6% 24.9% a. Calculate the following statistics for each stock: i. Alpha ii. Information ratio iii. Sharpe ratio iv. Treynor measure
9. 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% + 1.2(rM - r) 2% + 0.8(rM – r) R-square 0.576 0.436 Residual standard deviation, o(e) 10.3% 19.1% Standard deviation of excess returns 21.6% 24.9% a. Calculate the following statistics for each stock: i. Alpha ii. Information ratio iii. Sharpe ratio iv. Treynor measure
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:9. 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% + 1.2(rM – r)
2% + 0.8(rm – r)
R-square
0.576
0.436
Residual standard deviation, o(e)
10.3%
19.1%
Standard deviation of excess returns
21.6%
24.9%
a. Calculate the following statistics for each stock:
i. Alpha
ii. Information ratio
iii. Sharpe ratio
iv. Treynor measure
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