The beta of a firm's stock can be estimated as the slope of the best fitting straight line through a p of the stock's excess returns (on the x axis) versus the excess market returns (on the y axis). True

Q: The wider the dispersion of returns on a stock, the:

A: Investors evaluate the portfolio or security on the basis of risk profile. The risk profile can be…

Q: a) Share X and Share Y have the following returns with their respective probabilities. Share X Share…

A: Expected return can be found by multiplying the expected returns with the probabilities and then the…

Q: Illustrate the impact of changes in the dividend, the growth rate, the expected return on the…

A: The value of a stock is determined by several factors, including the dividend, the growth rate, the…

Q: c) Assume that using the Security Market Line (SML) the required rate of return (Ra) on stock A is…

A: We’ll answer the first question since the exact one wasn’t specified. Please submit a new question…

Q: Which is true about the M-square measure? It is a measure of portfolio excess return divided by its…

A: The M-squared measure is a way to evaluate the performance of an actively managed portfolio by…

Q: A price-weighted index such as the DJIA is a geometric mean of current stock prices. a. True b.…

A: To calculate the value of a price-weighted index such as the DJIA, one needs only to calculate the…

Q: c) Assume that using the Security Market Line (SML) the required rate of return (Ra) on stock A is…

A: Since you have asked multiple question, we will solve the first question for you. If you want any…

Q: 1. What are beta measures? (a) The volatility of the security (b) The joint volatility of any two…

A: Beta helps in measuring the systematic risk of a security or portfolio compared to the market as a…

Q: if the covariance of a stock A with the market M is 0.15 and the standard deviation of the market…

A: Covarianceof  a stock A with the market M=0.15Standard devation=36%

Q: Define the terms covariance and correlationcoefficient. How are they related to one another,and how…

A: Covariance refers to the situation which tells about the association between two variables how they…

Q: A stock has a market beta of 0.62 and a standard deviation of 0.27. If the market standard deviation…

A: Market Beta is 0.62 The standard deviation of a stock is 0.27 The market standard deviation is 0.30…

Q: Define average stock’s beta

A: Beta tells about the change in stock’s return given to change in market risk.

Q: a. Calculate the expected return for a share in S.  b. Calculate the standard deviation of a share…

A: (a) Calculating the expected return for a share in S:

Q: Assume that you run a regression on the raw returns of the stock of Company J against the raw…

A: > Jensen's Alpha is a measure of a stock's risk-adjusted performance, which compares the stock's…

Q: A stock has a negative beta and does not pay dividends. Given this information, a model that is…

A: CAPM model can be used to understand the manner expected return related to undiversifiable risk.…

Q: The slope of a regression line when the return on an individual stock's returns are regressed on the…

A: The problem case wants to identify the slope for a regression line that is drawn between the stock's…

Q: What does the meaning of maximum and minimum price in the stock performance graph? how to know which…

A: Succinctly summarized, a stock chart is a graph that illustrates the price of a stock over a certain…

Q: sing the single factor model for firm with a Beta of 1 and when the standard deviationof the market…

A: If the beta of a firm's stock is 1, it means there is a risk or standard deviation of the firm…

Q: Beta is measure of a stock's _____________________ risk. Select all that apply. A) systematic…

A: There are two types of risk are present: 1. Systematic risk 2. Unsystematic risk.

Q: The beta of an investment measures the probability weighted expected rate of return of a portf True…

A: Beta is measure of the risk and volatility of the stock and show how much is change in return with…

Q: What should be the risk premium and return on a stock with a Beta of zero under the Capital Asset…

A: CAPM is Capital Asset Pricing Model, used to calculated required return of stock based on 3…

Q: A stock's standard deviation determines how the stock affects the riskiness of a diversified…

A: The standard deviation measures total risk and beta measures the market risk. The statement mentions…

Q: How do you determine your estimate for beta?

A: The beta is a measure of how an individual asset moves (on average) when the overall stock market…

Q: The expected returns for David’s portfolio were calculated based on three possible conditions in the…

A: Standard deviation is a measure of unsystematic risk which shows the variability of returns of a…

Q: Which of the following is (are) correct regarding average returns? A B The geometric mean is a…

A: In finance the geometric average return is a way to figure out the rate of return, on an investment…

Q: Consider the following regression Pt * - Pt = .07(1.4) + .4*Pt (3.6) + et where Pt * is Shiller’s ex…

A: The efficient markets theory is a theoretical framework that explains the functioning of financial…

Q: 4. Which of the following statements is FALSE? A) A stock's return is perfectly positively…

A: Return on stock is the return that is gained by the investor for an investment in stock.

Q: The following information is given with respect to stock A: Market return Probability 0.1 Scenario 1…

A: In finance, risk and return are essential ideas. The unpredictability or fluctuation of investment…

Q: The market and Stock A have the following probability distributions: Probability Return on market…

A: Data given:    Probability Return on Market  Return on Stock A   0.2 18% 16% 0.3 12% 14%…

Q: Suppose that you have to choose an optimal portfolio from a list of n stocks. Stock i has expected…

A: The minimum variance portfolio:A rational investor is a person who invests in a portfolio on the…

Q: Suppose the beta estimated from the CAPM for stock A is 2.3 and stock B  is 1.1.   What is the beta…

A: CAPM stands for the Capital Asset Pricing Model. It defines the relationship of the systematic risk…

Q: What are the the key concepts (e.g., the standard deviation of the portfolio is less than the…

A: The question is based on the explanation of key concept behind creating a portfolio with different…

Q: Explain how the following parameters are used for analyzing a stock (or portfolio). Include in your…

A: Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…

Q: What is the formula for the Sharpe Ratio for a two-asset portfolio of stocks and bonds with equal…

A: Sharpe ratio is used in portfolio management to optimize the portfolio for minimum risk with maximum…

Q: beta for a stock

A: Introduction: Beta can be defined as a metric which helps in measuring the volatility of a stock…

Q: Which of the following shows the trade-off between expected profit (y-əxis) and in-stock probability…

A: The relationship between expected profit and probability is that for lower and higher expected…

Q: imate that the correlation between Abercrombie and Fitch (ANF) stock returns with market portfolio…

A: Beta of stock shows the risk related to overall market that means how much will change in stock…

Q: . Suppose the index model for stocks A and B is estimated with the following results: rA = 2% +…

A: Variance is a statistical measure that quantifies the dispersion or spread of a set of data points…

Q: Why is beta the theoretically correct measure of a stock’s risk?

A: Introduction: Risk refers to the degree of volatility involved in the anticipated return on…

Q: How do you calculate the beta of stock?

A: Beta is the measure of stock's volatility to the overall market, and is calculated as-

Q: how do you calculate a stocks average monthly return,its return variance ,standard deviation and…

A: Variance is a measure of risk of returns, it shows how much actual return has deviated from its…

Q: What does standard deviation measure? A. The holding period B. The gain on the investment C. Risk D.…

A: We make investments in different instruments like stocks, bonds etc. These investments gives us some…

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary. 

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.