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Financial Modelling > CAPM > Flashcards

CAPM Flashcards

(3 cards)

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1
Q

Explain Step 1 in Two Pass Regression

A

Determine a candidate for the market portfolio. Calculate the expected returns and betas.

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2
Q

Explain First Pass Regression

A

Regress the stock returns against the market to calculate beta.

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3
Q

Explain Second Pass Regression

A

Regress the asset mean returns against betas to determine market risk premium.

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