Question

You ran a market model regression and estimated the beta of a

lab’s preferred stock to be 0.7 with an associated standard error
of 0.3. The expected return on the broad stock-market is 9% per
year.

Answer 1

The beta estimation for alab's preferred stock is 0.7 with a standard error of 0.3. The expected return on the broad stock-market is 9% per year.

Step-by-step explanation:

In this question, the student is asked about the beta estimation for alab's preferred stock using a market model regression. The beta of the preferred stock is estimated to be 0.7 with a standard error of 0.3. The expected return on the broad stock-market is given as 9% per year.

Beta is a measure of a stock's sensitivity to market movements. A beta of less than 1 indicates that the stock is less volatile than the market, while a beta greater than 1 suggests the stock is more volatile than the market. In this case, a beta of 0.7 indicates that the preferred stock is less volatile than the overall market.