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Estimating the SML Equation 13.2 ;=17 = Yo + Y1 * b; i = 1,... 100 CAPM is valid, then yo and y, should satisfy Yo = 0 Y1 = ;=17 Equation 13.3 - 77 = Yo + Y1 * by + Y2 * o²(e;) This second-pass regression equation is estimated with the hypotheses Yo = 0: Y1 = ; = 17; Y2 = 0

Estimating the SML Equation 13.2 ;=17 = Yo + Y1 * b; i = 1,... 100 CAPM is valid, then yo and y, should satisfy Yo = 0 Y1 = ;=17 Equation 13.3 - 77 = Yo + Y1 * by + Y2 * o²(e;) This second-pass regression equation is estimated with the hypotheses Yo = 0: Y1 = ; = 17; Y2 = 0

Essentials Of Investments
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
Section: Chapter Questions
Problem 1PS
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Hello

This chapter is about security returns, and i dont understand what "Gamma, y" is in both of these equation.

They are supposed to be First and Second-pass regression equation. What is Gamma used for and how does this have a relation with the CAPM formula

Estimating the SML Equation 13.2 ;=17 = Yo + Y1 * b; i = 1,... 100 CAPM is valid, then yo and y, should satisfy Yo = 0 Y1 = ;=17 Equation 13.3 - 77 = Yo + Y1 * by + Y2 * o²(e;) This second-pass regression equation is estimated with the hypotheses Yo = 0: Y1 = ; = 17; Y2 = 0
Transcribed Image Text:Estimating the SML Equation 13.2 ;=17 = Yo + Y1 * b; i = 1,... 100 CAPM is valid, then yo and y, should satisfy Yo = 0 Y1 = ;=17 Equation 13.3 - 77 = Yo + Y1 * by + Y2 * o²(e;) This second-pass regression equation is estimated with the hypotheses Yo = 0: Y1 = ; = 17; Y2 = 0
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