The systematic and firm-specific components

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Reference no: EM132008540

Suppose that the index model for stocks A and B is estimated from excess returns with the following results:

RA = 1.8% + 0.75RM + eA
RB = -2.0% + 1.1RM + eB
sM = 23%; R-squareA = 0.18; R-squareB = 0.10

Break down the variance of each stock to the systematic and firm-specific components.

(Do not round intermediate calculations. Calculate using numbers in decimal form, not percentages. Round your answers to 4 decimal places.)

Risk for A Risk for B
Systematic

Firm-specific

Reference no: EM132008540

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