In the CAPM, what does beta measure? How is it computed? How would a change in inflation rate impact the security market line and a stock's beat? What impact would changing investor expectations have on the security market line and a stock's beta? What difficulties might be encountered when using the CAPM?© BrainMass Inc. brainmass.com December 19, 2018, 11:23 pm ad1c9bdddf
In the CAPM, what does beta measure? How is it computed?
Beta - Now, you gotta know about Beta. Beta is the overall risk in investing in a large market, like the New York Stock Exchange. Beta, by definition equals 1.0000. 1 exactly. Each company also has a beta. You can find a company's beta at the Yahoo!! Stock quote page. A company's beta is that company's risk compared to the risk of the overall market. If the company has a beta of 3.0, then it is said to be 3 times more risky than the overall market.
To estimate Beta, one needs a list of returns for the asset and returns for the index; these returns can be daily, weekly or any period. Next, a plot should ...
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