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11-03-2020
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An index model regression applied to past monthly returns in Ford’s stock price produces the following estimates, which are believed to be stable over time: rF = 0.10% + 1.1rM If the market index subsequently rises by 8% and Ford’s stock price rises by 7%, what is the abnormal change in Ford’s stock price?

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Capricious23 Capricious23

20-03-2020

Answer:

Abnormal change in Ford's stock = -1.80%

Explanation:

Abnormal change in return Ford's stock change =Increase in Ford's Stock change -Beta*Change in Ford's Stock Price

=7% -1.1*8% =-1.80%

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