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CAPM explain the intuitive meaning of the term “consistent estimator.” What does it imply practically about...

CAPM explain the intuitive meaning of the term “consistent estimator.” What does it imply practically about our ability to recover the true value of β?

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Answer #1

CAPM= Rf+B(RM-Rf)

here Rf= risk free return, B= beta , Rm=market return

here consistent estimator is beta

beta indicates the movement in the stock price in relation to the index movement

so, formula assume that whatever beta fixed for any particular stock will remain the same and constant throughout the period

However in practical scenario no one can predict the beta of the stock or the movement of the stock in relation to the movement of the index

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