If the covariance between the excess return of stock A and the market excess return...
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Finance
If the covariance between the excess return of stock A and the market excess return is 0.03, the standard deviation of the market excess return is 0.15, and the standard deviation of the excess return of stock A is 0.25, what is the idiosyncratic volatility? What fraction of the total risk (variance) comes from the systematic risk (variance)?
PLEASE USE THE FOLLOWING FORMULAS TO ANSWER THE QUESTION, DO NOT USE EXCEL:
1. Decomposition of total risk of a stock into systematic and idiosyncratic components: 0 = Bo+Tar[e] Where B C{R , R] 2. CAPM: | E[7] = +6;(E[7]-7) 3. Bond pricing formula P ' '
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