Question 4

Please refer an article 'How Do Investors Compute the Discount Rate? They Use the CAPM' to answer the following questions:

1. In determining which models perform the best, what approach does the study take and what tests do the study conduct? (Word limit: 150 words) (2 marks)

2. Of the models compared in the study, which models performs the best in explaining capital flows? (Word limit: 50 words) (1 mark)