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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)?
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?
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?
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
