Question
Suppose the CAPM-predicted expected return on Yahoo is 17%, but when you run a regression of excess return on Yahoo on the market excess return,
Suppose the CAPM-predicted expected return on Yahoo is 17%, but when you run a regression of excess return on Yahoo on the market excess return, you find that the regression intercept has a value of 2.5% with 95% confidence interval between [0.763%, 4.246%]. Which of the following is correct? A. Yahoo has a negative alpha. It is overpriced compared to CAPM. B. Yahoo has a negative alpha. It is underpriced compared to CAPM. C. Yahoo has a positive alpha. It is overpriced compared to CAPM. D. Yahoo has a positive alpha. It is underpriced compared to CAPM. E. Yahoos alpha is not statistically different from zero. It is fairly priced compared to CAPM.
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Meetings Expositions Events And Conventions An Introduction To The Industry
Authors: George Fenich
5th Edition
0134735900, 9780134735900
