If rf were constant at 68 and the regression had been run


Qusetion: Consider the two (excess return) index model regression results for A and B:

RA = -1.3% + 1.5RM

R-square = 0.670

Residual standard deviation = 13.6%

RB = 0.7% + 1.2RM

R-square = 0.572

Residual standard deviation = 12.2%

a. Which stock has more firm-specific risk?

b. Which stock has greater market risk?

c. For which stock does market movement has a greater fraction of return variability?

d. If rf were constant at 6.8% and the regression had been run using total rather than excess returns, what would have been the regression intercept for stock A? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal place. Omit the "%" sign in your response.)

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Finance Basics: If rf were constant at 68 and the regression had been run
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