index model_example

index model_example - 5 How do the index model correlations...

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1) What is the expected return of each stock, according to the index model? 2) What is the idiosyncratic risk of each stock, according to the index model? 3) What is the total risk of each stock, according to the index model? 4) What is the correlation between each pair of stocks, according to the index model?
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Unformatted text preview: 5) How do the index model correlations compare to the sample historical correlations? 6) Assume that the monthly risk-free rate is 0.0001. What is the tangency portfolio consisting of these five stocks?...
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index model_example - 5 How do the index model correlations...

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