question archive The index model has been estimated for stocks A and B with the following results: RA= 0
The index model has been estimated for stocks A and B with the following results: RA= 0
Subject:FinancePrice:2.86 Bought3
The index model has been estimated for stocks A and B with the following results: RA= 0.03 + 0.7RM+ eA RB= 0.01 + 0.9RM+ eB standard deviationmarket= 0.35 standard errorA = 0.20standard errors = 0.10 The covariance between the returns on stocks A and B is O 0.0772 O 0.0384 O 0.0406 O 0.1920 O 0.4000
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0.0772
σM = 0.35; σ(eA) = 0.20; σ(eB) = 0.10.
Covariance (RA, RB) = bAbBs2M
= 0.7(0.9)(0.35)2 = 0.0772.
