Month Rate of return Stock A Market portfolio 1 0.30 0.12 2 0.24 0.08 3 -0.04 -0.10 4 0.10 -0.02 5 0.06 0.08 6 0.10 0.07 a) Calculate the main statistic measures to explain the relationship between stock A and the market portfolio: The sample covariance between rate of return for the stock A and the market; The sample Beta factor of stock A; The sample correlation coefficient between the rates of return of the stock A and the market; The sample coefficient of determination associated with the stock A and the market.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter3: Risk And Return: Part Ii

Section: Chapter Questions

Problem 3P: Two-Asset Portfolio Stock A has an expected return of 12% and a standard deviation of 40%. Stock B...

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Month Rate of return Stock A Market portfolio

1 0.30 0.12

2 0.24 0.08

3 -0.04 -0.10

4 0.10 -0.02

5 0.06 0.08

6 0.10 0.07

a) Calculate the main statistic measures to explain the relationship between stock A and the market portfolio:
The sample covariance between rate of return for the stock A and the
market;
The sample Beta factor of stock A;
The sample correlation coefficient between the rates of return of the stock A and the market;
The sample coefficient of determination associated with the stock A and the market.

b) Draw in the characteristic line of the stock A and give the interpretation – what does it show for the investor?

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