CAPM Statistical Analysis

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Problem 1: <strong>CAPM</strong>• beta is proportionality factorE(ri| Ωt) − rfβi=E(r | Ω ) − rm– Excess returns for security over riskless return isproportional to excess returns in market overriskless returns– Excess is extra return to compensate for risk for notholding the market portfolio• Premium on security is proportional to premium onthe market portfoliotfPage 4
Problem 1: <strong>CAPM</strong>•IfβE(ri| Ωt) − rf= 1 ⇒ Premiumi> PremiummE(r | Ω ) − ri>m t fthen asset i is viewed as riskier than the marketPage 5
Page 1 and 2: CAPM Statistical AnalysisPage 1
Page 3: Problem 1: CAPM• beta is key- Eac
Page 7 and 8: Coding Sheet for CAPM DataVariableE
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Page 11 and 12: 20Excess ReturnsOverall Stock Marke
Page 13 and 14: 30Excess ReturnsCyclical Consumers
Page 15 and 16: 20Excess ReturnsNoncyclical Consume
Page 17 and 18: 40Excess ReturnsTelecommunications
Page 19 and 20: Problem 1: CAPM• Interpretation-
Page 21 and 22: Problem 1: CAPMModel PortfolioModel
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CAPM Statistical Analysis

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