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 A | Stock B |
| Index model regression estimates | 1% + 1.2(rM − rf) | 2% + 0.8(rM − rf) |
| R-square | 0.611 | 0.454 |
| Residual standard deviation, σ(e) | 10.9% | 19.7% |
| Standard deviation of excess returns | 22.2% | 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
