Write the equation showing the relationship

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Reference no: EM132201203

Question: We have the following data on return on a portfolio of all assets (return from market) and return on asset A. Show your work in full details.

Year	Return from market	Return on asset- A
2000	6	11
2001	2	8
2002	-13	-4
2003	-4	3
2004	-8	0
2005	16	19
2006	10	14
2007	15	18
2008	8	12
2009	13	17

a. Suppose the return from the market portfolio when return from asset A is 0 is Î²₀, and the increase in market return from a 1 unit increases in return from asset A is a constant Î²₁. If R_p is the return on the market portfolio and R_A is the return on asset A, write the equation showing the relationship between R_p and R_a.

b. Calculate the value of Î²₀ and Î²₁ for the sample.

c. If the return from asset A is 14, what is estimated R_p? Is this different from the observed value of R_p when R_A is 14? Why?

Reference no: EM132201203

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