Two regression lines are presented (attached) for stocks A & B.
a) Which stock has higher firm-specific risk? Explain.
b) Which stock has greater systematic (market) risk? Explain.
See the attached file.© BrainMass Inc. brainmass.com June 3, 2020, 6:36 pm ad1c9bdddf
See the attached file.
a) Stock A has a higher firm-specific risk.
The goodness of fit of regression line is better for Stock B than for Stock A.
The better the fit the more is the ...
Using regression of excess return on stock on market premium, the stock with higher firm-specific risk and greater systematic (market) risk are identified.