If GE has an annual risk of 27.4 percent, what is the volatility of monthly GE returns?How do...

Question

If GE has an annual risk of 27.4 percent, what is the volatility of monthly GE returns?

How do structural risk models help in estimating asset betas? How do these betas differ from

those estimated from a 60-month beta regression?

Rochak · Accepted Answer

a. Volatility of monthly GE returns = Annual Risk/SQRT (12)
= 27.4%/SQRT (12)
= 7.91%
b. Risk models help identify the movement in the stock returns; therefore, based on this, the volatility is calculated for both the stock and market, which then helps in estimating the asset betas.

If GE has an annual risk of 27.4 percent, what is the volatility of monthly GE returns? How do structural risk models help in estimating asset betas? How do these betas differ from those estimated...

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