What were the historical average rates of return

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Apply the CAPM. Assume the risk-free rate of return is the current yield on 5-year bonds.

Assume that the market's expected rate of return is 3% per year above this. Download 5 years of daily rate of return data on four funds: NAESX, VLACX, VUVLX, and VWUSX.

• What were the historical average rates of return?

• What were the historical market betas?

• What were the historical market betas, adjusted (shrunk) toward 1 by averaging with 1?

• How do these estimates compare to the market beta estimates of the financial website from which you downloaded the data?

• Does it appear as if these funds followed a CAPM-like relationship?

Reference no: EM131235464

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