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Consider the two (excess return) index-model regression results for stocks A and B. The risk-free rate...

Consider the two (excess return) index-model regression results for stocks A and B. The risk-free rate over the period was 6%, and the market’s average return was 15%. Performance is measured using an index model regression on excess returns. What is the Information Ratio of each stock?

Stock A

Stock B

Index model regression estimates

0.5% + 1.1(Rm - Rf)

0.8% + 0.9(Rm - Rf)

R-square

0.594

0.445

Residual standard deviation

5.60%

9.40%

Standard deviation of excess returns

16.90%

19.50%
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