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Recall that the CAPM model describes the excess return of asset i as a function of the excess return of the market M: Ri =
Recall that the CAPM model describes the excess return of asset i as a function of the excess return of the market M: Ri = ai + BiRM. Using this framework, explain the statement \more risk, more reward." What types of risks are rewarded? Why? What does the ai term represent?
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