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Consider the two (excess return) index-model regression results for stocks A and B. The risk-free rate...

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Finance

Consider the two (excess return) index-model regression resultsfor stocks A and B. The risk-free rate over theperiod was 5%, and the market’s average return was 14%. Performanceis measured using an index model regression on excess returns.

Stock AStock B
Index model regression estimates1% + 1.2(rM − rf)2% + 0.8(rM − rf)
R-square0.6110.454
Residual standard deviation, σ(e)10.9%19.7%
Standard deviation of excess returns22.2%26.1%

a. Calculate the following statistics for eachstock: (Round your answers to 4 decimalplaces.)


Stock A & Stock B

i.Alpha

ii.Information ratio

iii.Sharpe ratio

iv.Treynor measure

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