HW5 - Observations 120 Coefficients Standard Error alpha...

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Purdue University Krannert School of Management MGMT 411: INVESTMENTS Assignment #5 Due: October 6th No late assignments will be accepted. You have information about two stocks: Apex and Bpex. Namely, the output from regressing the monthly returns of Apex and Bpex on the S&P 500 Index monthly return for the period 2000- 2009 is: Regression Statistics for Apex R Square 0.35 Idiosyncratic risk 0.045 Observations 120 Coefficients Standard Error alpha 0.0012 0.0010 beta 0.91 0.31 Regression Statistics for Bpex R Square 0.36 Idiosyncratic risk 0.053
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Unformatted text preview: Observations 120 Coefficients Standard Error alpha 0.0044 0.0020 beta 1.32 0.23 The variance of the return of the S&P 500 index is 0.04. a) What is the covariance between the two stocks? b) Test the hypothesis that the alpha of Bpex is equal to 0. Based on the regression output from above, what is the conclusion from your test? c) Based on the regression output, which company has higher idiosyncratic risk? d) What is the total variance of Bpex stock return according to the index model?...
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This note was uploaded on 02/06/2012 for the course MGMT 411 taught by Professor Clarke during the Spring '09 term at Purdue University.

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