Question
The capital asset pricing model (CAPM) can be written as E(R i ) = R f + i [E(R m ) R f ] where,
The capital asset pricing model (CAPM) can be written as
E(Ri ) = Rf + i [E(Rm) Rf ]
where,
ERi = Expected return of investment
Rf = Risk-free rate
i = Beta of the investment
ERm = Expected return of the market
(ERm - Rf) = Market risk premium
The first step in using the CAPM is to estimate the stocks beta using the market model.
(R i - r f )t = + (RM - r f )t + ut
Using EViews, select two stock series[1] along with index values for the BIST as the proxy of the overall market and the treasury bond data standing for the risk-free rate[2]. Estimate the CAPM beta values for those stocks. What are your conclusions?
[1] The name of the first security starts with the first letter of your first name and the name of the second security starts the first letter of your surname. ( Name : B and Surname : K)
[2] Employ at least five years of monthly data of each variable for estimating betas
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