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Assumptions underlying the capital asset pricing model

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Reference no: EM132719716

Why is it so common to use historical financial data to estimate future market betas?

Assume that you have invested half of your wealth in a risk-free asset A and half in a risky portfolio B. Is it theoretically possible to lower your portfolio risk if you move your risk-free asset holdings (A) into another risky portfolio C? In other words, can you ever reduce your risk more by buying a risky security than by buying a risk-free asset?

Describe the key assumptions underlying the Capital Asset Pricing Model (CAPM).

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Reference no: EM132719716

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