medium · Quantitative Finance
In a simple linear regression of a stock's excess returns (y) on the market's excess returns (x), the sample covariance is 0.004 and the market variance is 0.0025. If the average excess market return is 1.0% and the average stock return is 2.0%, determine the OLS estimate for the stock's alpha (α).
- 1.60%
- 1.00%
- 0.40%
- 0.625%
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