Fill This Form To Receive Instant Help

Help in Homework
trustpilot ratings
google ratings


Homework answers / question archive / You know that the standard deviation of excess return on stock A is 1

You know that the standard deviation of excess return on stock A is 1

Finance

You know that the standard deviation of excess return on stock A is 1.7418, the variance and the standard deviation for the excess market return are 1.4110 and 1.1880, respectively. The correlation coefficient between excess return on stock A and excess market return is 0.5273. Show that ?? =0.7733. (Round your results to 4 decimal number)

pur-new-sol

Purchase A New Answer

Custom new solution created by our subject matter experts

GET A QUOTE

Answer Preview

Correlation(A,Market) = Covariance(A,Market) / (Standard Deviation of A x Standard deviation of Market)
Covariance(A,Market) = 0.5273 x 1.7418 x 1.188 = 1.0911

Beta = Covariance(A,Market) / Variance of Market = 1.0911 / 1.411 = 0.7733