1-Compute the abnormal rates of return for the following stocks during period t ( ignore differential systematic risk):
Stock Rit Rmt
B 11.5% 4.0%
F 10.0% 8.5%
T 14.0% 15.3%
C 12.0 12.4
Rit= return for stock I during period t
Rmt= return for the aggregate market during period t
2. Compute the abnormal rates of return for the fives stocks in problem 1 assuming the following systematic risk measures (betas):
3. Compare the abnormal returns in problems 1 and 2 and discuss the reason for the difference in each case.
4. Look up the daily trading volume for the following stocks during a recent five day period:
Randomly select five stocks from the NYSE and examine their daily volume for the same five days.
a-What are the average volumes for the two samples