Estimate Beta Like a Pro
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Questions and Answers

Which of the following methods can be used to estimate beta in the Capital Asset Pricing Model (CAPM)?

  • Regression analysis of the stock returns against market returns (correct)
  • Historical beta estimation
  • Estimation using the dividend discount model
  • Estimation using the earnings-per-share

    • What does beta measure in the CAPM?

  • The expected return of the stock
  • The risk-free rate of return
  • The systematic risk of the stock (correct)
  • The unsystematic risk of the stock

    • What is the significance of beta in the CAPM?

  • Beta determines the expected return of the stock (correct)
  • Beta determines the diversifiable risk of the stock
  • Beta determines the unsystematic risk of the stock
  • Beta determines the risk-free rate of return

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