Explanation:
The monthly active return generated by the stock = 0.82%
Yearly Return = 0.82% × 12 = 9.84%
As Beta = 0.69, the stock carries approximately 70% of market risk.
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Q.2419 A fund manager tracks the monthly return of ABC Corporation – an asset management company. She regresses the monthly return of ABC against the market returns for the past 5 years. The regression output is given in the table below:
| Parameter | Coefficient |
|---|---|
| Alpha | 0.82% |
| Beta | 0.69 |
| Asset under management | $10 million |
The stock generates a yearly active return of:
A
0.82% with approximately 70% of market risk.
B
8.20% with approximately 30% of market risk.
C
9.84% with approximately 70% of market risk.
D
0.82% with approximately 30% of market risk.
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