Whether the past returns can be used to build the trading approach that generates money. Introduction: Stock alpha is overabundance risk of the required return, which implies that it is controlled by subtracting the required return of the stock as per security market line (SML) from the expected return of the stock.

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Chapter 13, Problem 23P

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To determine: Whether the past returns can be used to build the trading approach that generates money.

Introduction: Stock alpha is overabundance risk of the required return, which implies that it is controlled by subtracting the required return of the stock as per security market line (SML) from the expected return of the stock.

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