Question
You are provided with the following monthly expected returns, each of which is represented by E(R i ), and betas for the following stocks. Please
You are provided with the following monthly expected returns, each of which is represented by E(Ri), and betas for the following stocks. Please estimate the capital asset pricing model and draw conclusions about the significance and realism of the results. (Note: Please use conventional tests of the R-squared and coefficients.) On the basis of your results, please name at least three of the stocks that you would recommend as buys.
E(Ri) Beta
AA | 0.8 | 1.3 |
AXP | 0.8 | 1 |
BA | 1 | 0.80 |
C | 0.8 | 1.35 |
CAT | 1.2 | 1.7 |
CSCO | 0.6 | 0.95 |
KO | 0.4 | 0.6 |
DIS | 0.6 | 0.95 |
DD | 0.6 | 0.7 |
ED | 0.4 | 0.55 |
XOM | 0.4 | 0.6 |
GE | 0.5 | 0.9 |
GM | 0.6 | 0.8 |
HPQ | 0.4 | 1.3 |
HD | 0.4 | 0.9 |
HON | 0.9 | 1.15 |
INTC | 0.8 | 1.1 |
IBM | 0.9 | 1.4 |
IP | 0.4 | 0.80 |
JNJ | 0.3 | 0.35 |
MCD | 0.6 | 0.5 |
MSFT | 0.8 | 1.2 |
MMM | 0.5 | 0.9 |
JPM | 0.9 | 1.70 |
PG | 0.4 | 0.45 |
SYK | 0.6 | 0.4 |
T | 0.6 | 1 |
UTX | 1.1 | 1.1 |
WMT | 1 | 0.8 |
WPC | 0.7 | 1.2 |
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