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Suppose the returns on all well-diversified portfolio is determined by the following two factor model: r E(r)=+(())+(()) ww 111222 What does no arbitrage equilibrium imply

Suppose the returns on all well-diversified portfolio is determined by the following two factor model: r E(r)=+(())+(()) ww 111222 What does no arbitrage equilibrium imply about the value of ? Explain you reasoning. Suppose you estimate this model empirically and find that > 0. How could one use this information to obtain profit int his market?

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