Question

nce theory, the Capital Asset pricing Model postulates a relationship between the ticular stock and the market return" according to the following model: R,Return on asset i, R Return on the market as a whole, The risk-free rate of return. rp An asset's risk premium is the excess of its return over the risk-free rate, therefore this equation premia fluctuate more than one-for-one with the market are called aggressive assets. 1. Use the data provided to you here below to estimate the CAPM model for Xerox, including an relates the risk premium of asset i to the risk premium on the market. Assets having risk prerm fluctuate less than one-for-one with the market are called defensive assets, and those whose risk intercept. i.e. a model specified as follows: Xerox best described as a defensive, neutral, or aggressive stock? Is your conclusion 2. Is statistically significant? (use a 5% significance level) 3. The also earn and your sample average risk premia, is it true for Xerox? CAPM suggests that securities having more systematic risk than the market should typically a higher risk premium than the market, and vice versa. Considering your estimate of beta istically significant (also at 5% ? What implication(s) 4. Are your slope and intercept estimates stat can you make from your test conclusions?

Answer 1

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