question archive Suppose that the index model for stock A and B is estimated from excess returns with the following result: R A = 3% + 7R M +eA R B = -2% +1
Suppose that the index model for stock A and B is estimated from excess returns with the following result: R A = 3% + 7R M +eA R B = -2% +1
Subject:MathPrice: Bought3
Suppose that the index model for stock A and B is estimated from excess returns with the following result:
R A = 3% + 7R M +eA
R B = -2% +1.2 R M + eB
σ M = 20% R-square A = 20 R-sqaure B = 12
What are teh covariance and correlation coefficient between the two stocks?
