Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

How well does the CAPM work in practice? In class we discussed some empirical evidence regarding how the CAPM performs in practice. In addition, we

How well does the CAPM work in practice? In class we discussed some empirical evidence regarding how the CAPM performs in practice. In addition, we also discussed that in the real world there is a "Value Premium" (as explained in the previous question). In this question I want you to investigate two things: (a) does the value premium varies across industries (i.e. is it bigger/smaller in some industries relative to others), and (b) does the CAPM can explain the difference in the average returns (i.e. capture the value premium within industries) of these portfolios? In order to answer these questions please open again the Excel data file: Industry Value DataV2.xlsx, and take a look at the second worksheet with title "Industry Portfolios". In this worksheet, you have data with the excess monthly returns (i.e. Re RiRf, and in percentage, so, different from question 1, these are now excess returns, in excess of the risk free rate) for 6 portfolios for 3 industries. The 3 industries are: (1) Consumer Goods, (2) Ma

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Oxford Handbook Of Computational Economics And Finance

Authors: Shu-Heng Chen, Mak Kaboudan, Ye-Rong Du

1st Edition

0199844372, 978-0199844371

More Books

Students also viewed these Finance questions

Question

9 ) Distinguish between the shear center and elastic center.

Answered: 1 week ago