1. How can the investor use regression analysis to test empirically whether the Capital Asset Pricing Model (CAPM) holds for the Danish stock market?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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PROBLEM 1 (INVESTMENTS]
Consider a Danish investor who uses asset pricing models for analyzing the stock market.
1. How can the investor use regression analysis to test empirically whether the Capital Asset
Pricing Model (CAPM) holds for the Danish stock market?
The investor believes that the 3-factor Arbitrage Pricing Theory (APT) model characterizes the Danish
stock market.
2. Describe and explain the expected return equation that applies in the 3-factor APT model.
3. Describe and explain the Fama-French 3-factor APT model.
Transcribed Image Text:PROBLEM 1 (INVESTMENTS] Consider a Danish investor who uses asset pricing models for analyzing the stock market. 1. How can the investor use regression analysis to test empirically whether the Capital Asset Pricing Model (CAPM) holds for the Danish stock market? The investor believes that the 3-factor Arbitrage Pricing Theory (APT) model characterizes the Danish stock market. 2. Describe and explain the expected return equation that applies in the 3-factor APT model. 3. Describe and explain the Fama-French 3-factor APT model.
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