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High operating income means higher fixed costs (relative to variable costs) and thus a riskier firm and a higher beta.
High operating income means higher fixed costs (relative to variable costs) and thus a riskier firm and a higher beta. This problem wants to re-establish the relationships in the statistics from a regression with the variances and covariances of the random variables (here the returns of AMR and the S&P 500). A. You know that the R-squared of the regression is 0.36 and the stock has a variance of 0.67. The market variance is 0.12 so...what is the beta of the stock? B. You know that AMR did worse than expected by 0.39 percent (0.0039) during the regression and the risk-free rate during the regression period was 4.84%. What is the intercept of the regression?
