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What is the covariance between the returns on stocks a and b

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The index model has been estimated for stocks A and B with the following results:RA= -0.06 + 0.85RM+ eA
RB= 0.03 + 2.95RM+ eB

Problem 1: 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: EM132819335

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