Which of the following(s) would be ways to reject the CAPM? a showing that there exist a stock with zero beta with the market earns an expected return higher than the risk free rate b showing that there exist a stock that earns higher expected return than the market c Showing that a portfolio consistently generates a negative alpha d Showing that a certain factor predicts expected return even after controlling for market beta
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
Which of the following(s) would be ways to reject the
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a
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showing that there exist a stock with zero beta with the market earns an expected return higher than the risk free rate |
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b
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showing that there exist a stock that earns higher expected return than the market |
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c
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Showing that a portfolio consistently generates a negative alpha |
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d
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Showing that a certain factor predicts expected return even after controlling for market beta |
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