The risk free rate over the period is 6% and the market's index average return...
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The risk free rate over the period is 6% and the market's index average return was 14%
The excess return single index model regression results for Stock ABC and MNO are:
index model regression estimates:
ABC: 1%+1.2(Rmt - Rft) MNO: 2%+0.8(Rmt - Rft)
R Squared
ABC: 0.576 MNO: 0.436
Residual Standard Deviation
ABC: 10.3% MNO: 19.1%
Standard Deviation of excess return
ABC: 21.6% MNO: 24.9%
1) CALCULATE (for each stock) a) jensen's alpha b) information ratio c) sharpe ratio d) M squared e) Treynor measure f) T squared
2) Explain whether each stock underperformed, equaled, or outperformed the market index benchmark. By which measure did such fund outperform the benchmark market index?
3) Which stock is the best choice under these circumstances? a) this is the only risky asset to be held by the investor b) this stock will be mixed with treasury bills c) this stock will be mixed with the rest of the investor's portfolio , currently composed solely of holdings in the market index fund d) this is one of many stocks that the investor is analyzing to form an an actively managed stock portfolio
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