In chapter 13, we discussed the steps followed by the early simple tests that are used to test the implications and predictions of CAPM (i.e., the same steps are used to test the index model and single factor APT). In this problem, you are asked to conduct such a test using real data of your selected stocks/assets over the sample period of 120 months (i.e., 10 years) starting from 10/01/201310/31/2023. Here are the three steps that you need to follow: Step 1: Setting Up the Sample Data Collect a monthly price data on 10 stocks/assets (although your regression in step 3 may not be statistically sound as you will only have n=10 observations, I don't want you to gather data on n=100 stocks) over the given sample period. For the same sample period, gather data on rate of returns of the market index (i.e., S\&P 500) as well as risk free rates. (Hint: See the FamaFrench Dataset). Step 2: Estimating the Security Characteristic Line (SCL) Using equation 13.1 or its estimable version of the equation given at the bottom of page 415 on your textbook, run the first-pass regression equation to get estimated of beta coefficients as its slope. Then compute the following statistics based on your estimates: rlrf= Sample averages (over 120 months) of the excess return on each of your 10 stocks/assets. bi= Sample estimates of the beta coefficients of each of the 10 stocks/assets rMrf= Sample average of the excess returns of the market index (i.e., S\&P 500). 2(ei)= Estimates of the variance of the residuals for each of the 10 stocks/assets. Step 3: Estimating the SML and Conduct Hypothesis Testes Now estimate equation 13.2 using rirf as your left-hand-side (i.e., Y) variable and the estimated bi as your regressor (right-hand-side) variable. Using the estimated parameters, conduct the following hypotheses: i) H0:0=0 against H1:0=0 ii) H0:1=rMrf against H1:1=rMrf iii) Then after you run a regression on equation 13.3, test the hypothesis that claims nonsystematic risk should not be priced (i.e., it shouldn't matter in a well-diversified portfolios.) as H0:2=0 against H1:2=0. [Hint. after your step 2, get the residuals and compute their variances of each stock as your measure of nonsystematic/firmspecific risk. It is this variances that will be added in Equation 13.3 here). Step 4: Interpret and explain your findings Based on the results of your analysis, provide a one paragraph explanation and interpretation of your finding related to the predictions of the basic CAPM. Discuss also at least three limitations of the above test procedure and provide your suggested solutions for them