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Covariance between the returns on stocks a and b

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Reference no: EM132801991

The index model has been estimated for stocks A and B with the following results:

RAMARBMB = -0.06 + 0.85R+ e

= 0.03 + 2.95R+ e

The standard deviation of the market index is 18%; the residual standard deviation of the error terms for stock A is 44%; the residual standard deviation of the error terms for stock B is 35%. What is the covariance between the returns on stocks A and B?

Reference no: EM132801991

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