An index model regression applied to past monthly returns in Ford’s stock price produces the following estimates, which are believed to be stable over time: rF = 0.1% + 1.1rM If the market index subsequently rises by 10.2% and Ford’s stock price rises by 10%, what is the abnormal change in Ford’s stock price?

An index model regression applied to past monthly returns in Ford’s stock price produces the following estimates, which are believed to be stable over time: rF = 0.1% + 1.1rM If the market index subsequently rises by 10.2% and Ford’s stock price rises by 10%, what is the abnormal change in Ford’s stock price?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 3P

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An index model regression applied to past monthly returns in Ford’s stock price produces the following estimates, which are believed to be stable over time:rF = .10% + 1.1rMIf the market index subsequently rises by 8% and Ford’s stock price rises by 7%, what is the abnormal change in Ford’s stock price?
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