Capital asset pricing model

Reference no: EM13673352

CAPM (Capital Asset Pricing Model) is a model for pricing an individual security or portfolio. The formula for CAPM is: (R_i )=R_f+β_i·(E(R_m )-R_f ) , where E(Ri) is the expected return of an asset, Rf is the risk-free return (we will use monthly T-Bills), E(Rm) is the expected return of the market and betai is considered the sensitivity of the expected excess asset return to the expected excess market return. How do we calculated the beta? Via regression of course.

Estimate the value of Google's beta. Use the past 36 months of returns. Try and use quantmod to download the T Bill data directly. If not, you can always download the data from another source and load it separately.
Interpret your results.
Repeat parts a and b using daily returns for the past three years.
Interpret any difference.

Reference no: EM13673352

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Capital asset pricing model : Capital Asset Pricing Model

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