Idiosyncratic risk of the stock, Financial Accounting

Assignment Help:

(a)   The market considers Intel Corp (INTC) of all these stocks to be the riskiest since it has the highest beta of 1.497408. No, this measure of risk does not include the idiosyncratic risk of the stock. The idiosyncratic error will be included in the ε item in the market model of each stock.

(b)  Intel Corp (INTC) had price changes that were least closely related to the market, because it has the highest beta and hence more variation from the returns of S&P.

(c)   Apple (AAPL) has the highest expected returns. The average monthly return for this stock is 0.0234130, which is the highest of all stocks and this occurs even when the index returns are zero or flat.

(d)  With the given information and the given equation,

Expected return of HD = 0.0195538 + 1.089703*10% = 0.128524 = 12.8524%

Thus the expected return of HD is 12.8524% for the next month, with the given predictions (ignoring error term).

 


Related Discussions:- Idiosyncratic risk of the stock

Fair value adjustments, explain the purpose and circumstances of using fair...

explain the purpose and circumstances of using fair values in preparing consolidated financial statements

Calculate interest rate forecasting, Assume that we are in December 2009 an...

Assume that we are in December 2009 and try to make forecasts of the five year interest rate at the end of January 2010. For this question , you just need to fill out the blank s

Financial reporting, what the meaning of the economic consequences of accou...

what the meaning of the economic consequences of accounting information quality with examples?

Process to increase the financial health of company, Process to increase th...

Process to increase the financial health of company Financial affairs of a limited company enter public domain. With exception of small companies, there is also a requirement f

Shorter compounding period, In our discussion so far, we have supposed that...

In our discussion so far, we have supposed that the compounding is done yearly, here let us see the case where compounding is complete more often.  In such case the equation (1) is

Prepare an income statement, Tyler Smith has worked in an upholstery shop f...

Tyler Smith has worked in an upholstery shop for 10 years. Tyler's wages were $20,000. Lately, Tyler has been unhappy with the shop's owner. Convinced that he could run an upholste

Prepare an income statement, a) DELL computers sell 100 PCs at Rs.42,000. T...

a) DELL computers sell 100 PCs at Rs.42,000. The variable expenses amount to Rs.28,000 per PC. The total fixed expenses is Rs.14,00,000. Prepare an income statement.   b.) Ca

Earnings and dividends per equity share, Whereas dividend may be of prime s...

Whereas dividend may be of prime significance to some equity shareholders, this may not be so for the other shareholders. Several shareholders may be interested in receiving a usua

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd