Consider the two (excess return) index-model regression results for stocks A and B. The risk-free...
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Finance
Consider the two (excess return) index-model regression results for stocks A and B. The risk-free rate over the period was 6%, and the markets average return was 15%. Performance is measured using an index model regression on excess returns.
Stock A
Stock B
Index model regression estimates
1% + 1.2(rMrf)
2% + 0.8(rMrf)
R-square
0.594
0.445
Residual standard deviation, (e)
10.6%
19.4%
Standard deviation of excess returns
21.9%
25.5%
By how much does Alpha of Stock A exceed Alpha of Stock B? (Negative values should be indicated with a minus sign. Enter your answer in percentage points. Round your answers to 4 decimal places.)
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