Using R² as the measure of goodness of fit, compare the market model estimated in question 23 with the CAPM version estimated in question 24.

Question 24

In finance, we sometimes choose to estimate the capital asset pricing (CAPM)
version of the market model, which is given by the equation

where R_j,t is the return on a risk-free asset (such as T-bills) in month t. Repeat parts (a)–

(d) of question 23 for the CAPM version of the market model using the MINITAB program.

Question 23

In finance, we are often interested in how the return of one stock is related to some market index such as the NYSE. The model we usually estimate to understand this relationship is known as the market model and is given by the equation

Transcribed Image Text:

Rjt - Rft=j+B; [Rms Rf] + ejt -