Size Effect
Size Effect
Size Effect
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CAPM<br />
Capital Asset Pricing Model<br />
• All Expected Stock Returns are a function<br />
of:<br />
– Risk free borrowing Rate (R(<br />
f )<br />
– Riskiness of stock, as measured by Beta (B i )<br />
– Excess return on Market Portfolio [E(R[<br />
m )-R f ]<br />
E(R i ) = R f +B i [E(R m )-R f ]
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