Financial Econometrics Evaluation of CAPM Model Assignment Sample

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Financial Econometrics: Evaluation of CAPM Model
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Financial Econometrics:
Evaluation of CAPM
Model
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Table of Contents
INTRODUCTION ...........................................................................................................................2
CONCEPTUAL FRAME ..................................................................................................................9
DATA ANALYSIS........................................................................................................................10
REFERENCES .............................................................................................................................13
APPENDIX .................................................................................................................................12

List of tables
Table 1 Stock beta coefficient estimates (Time-series regression outputs).............................11
Table 2. Result output from the cross-sectional regression .....................................................13

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INTRODUCTION
Almost certainly, among the most widespread questions posed before an investor is
where to invest the money owned, so as to retain or not losing the present value, and at the
same time to increase the wealth. As per the critical global events happening around the
world, economy has itself become much volatile now. Such critical condition is encountered
in the financial sector much frequently, where troughs and peaks are quite evident in
economies.
In financial economics, the proposition stating that a properly regulated security
market bears a vital package for economic services is widely accepted now. Among the
numerous vital functions of security market or the stock exchange comprise of requisites for
liquidity and an unremitting market for shares from the standpoint of investors. For
economy’s growth, in general , a vigorous stock market is considered as indispensable factor
and is expected to add in productivity. An efficient pricing mechanism in a stock market is
the driving force to channelize the savings into commercial investment and thus, make it
possible for an optimal allocation of funds. This implies that the pricing mechanism assures a
suitable return on investment. Therefore in stock markets, pricing function is considered to be
important and is regarded as a subject of broad research. According to the literature survey
for stock market, majority of the researches are based on the asset pricing models like capital
asset pricing model (CAPM), Merton (1973) inter-temporal CAPM, the arbitrage pricing
theory (APT) and Breeden (1979) version of consumption based CAPM.

CAPM has been the heart of all the studies. Here, the main objective is to review the
conceptual framework of this model, also, to test the efficiency of the CAPM model in the
context of any stock market. CAPM model is developed by different authors in almost the
same time frame. These authors are Treynor (1961), Sharpe (1964), while Lintner (1965),
Mossin (1966). Further the model has been extended by Black (1972) and he clarified it.
Certainly, there exist numerous models in Finance and Economics to estimate risks,
and the expected returns for both risky as well as risk-free assets. In addition to this, there are
also many models, which are capable of estimating the effects of each individual asset on the
entire investment portfolio and thus imply the concept of optimal portfolio management.
In the present paper, Capital asset pricing model has been chosen, which is one of the
most extensively used approach for valuation of an asset, constructing efficient investment
portfolios and forecasting the future rates of return of such asset. So the research project is
primarily devoted to the efficiency test of the Capital Asset Pricing Model. Main Objectives
of the report are:
Identify the relationship between the expected returns and risks
Spot the interdependence amongst variables

CAMP MODEL
In Finance, theoretically, CAPM is the method used to determine a appropriate rate of
return required for an asset, while adding that to an existing well-diversified portfolio, given
the non-diversifiable risk of the asset. CAPM has been the model employed for the most of
the real world analysis available and used for the longest time period. In finance, this method
is considered to be the standard one for investment analyses (Bossaerts, 2003).
An investor thinks about several things before investing in any instrument. Every
financial instrument has its own risk and return and so investor must know about risks
involved in any investment and expected return from it. A fundamental concept of finance
indicates that risk and return from investment are correlated to each other which means more
the risk involved in an investment, higher the rate of return (Brigham and Houston, 2009).
So as an investor every individual deserves a rate of return that compensates him for taking
risk by investing in an instrument. Most of the Investors do a long analysis by using various
risk management techniques before taking an investment decision so that they can minimize
the risk. Risk management techniques help an investor about knowing and minimizing risks
involved in an investment (Doherty, 2000).
Capital Asset and Pricing Model (CAPM) is one of the key analyses which are done
by an investor before taking an investment decision. This model provides a formula which
calculates the expected return on an investment based on involved risk level in it. This model
declares that the riskier the stock, the superior its expected return.
The below given economic specification of this model describes that the risk free rate
plus beta times the difference of the return on the market and the risk free rate.
− = + − +

The expected values of each side of this model can be seen as below:
− = + [ − ]
It looks like CAPM but the asset pricing model imposes the following constant on
expected returns:
− = + [ − ]
OR
= 0

Value of the beta factor for market portfolio is always 1 as from the above expression
it is evident that the covariance of the market portfolio and itself is simply the variance of
market. Riskier assets are expected to have values of betas greater than 1, whereas the less
risky assets will have a beta less than one (Damodaran, 2003)
There are three basic inputs as described by Professor Damodaran (2002) for CAPM.
These are as follows:
Return on the risk-free asset: Risk free asset is the one for which the expected return
are known by the investor with certainty in a defined time horizon taken for the
analysis. Here, the risk free assets can be taken as the government bonds, T-bills etc.
Risk premium for the asset: Risk premium is the additional return demanded by the
investor for investing in the market portfolio including all risky assets. In accounting
terms, risk premium is the opportunity cost for not investing in risk-free asset.
Beta: It measures the additional risk contributed by the asset to the overall market
portfolio.
There are two key importance of CAPM,
1. This model helps investors in measuring and evaluating portfolio risk and expected
return of the investment.
2. On the basis of this model risk can be classified as either systematic, that is
unavoidable due to the nature of the market itself diversifiable or diversifiable risk
which can be avoided by balanced investing (Brigham and Ehrhardt, 2011).

CONCEPTUAL FRAME
Theoretical CAPM model is given by the following equation:
− = + − +
Taking the expectation of both sides:
− = [ ] + − + [ ]
+ 0− = + −
− = + −
Theoretical constraint for the above equation is that:
= 0
Thus, − = −
This implies that the expected excess return on security holds a linear relationship
with the security’s beta. Here, beta is the systematic risk of security in the market portfolio.
This model can also be derived with statistical technique of least square estimate.
Thing making CAPM model indifferent from the statistical model is that CAPM imposes the
constraint of alpha being zero. To test the efficiency of the model, betas of particular
securities should be examined for explaining the cross sectional differences in the average
returns. For this, following cross sectional regression equation can be considered:
− = + ∗ +
Now, for testing the efficiency of the CAPM model,
1.
2.
= 0
= ℎ

Through regression using SPSS software, for all the 30 stocks with respect to the
market portfolio (S&P 500 index), thirty different betas, alphas, and residuals of such stocks
are derived.
All this terms are further used to run the cross-sectional regression, to evaluate
whether these betas are linked to the expected values of return predicted by the CAPM
model. Form of the cross-sectional regression is as follows:
− = + + ε
At the start, the mean returns for each stock will be calculated. In the second
regression, mean returns are treated to be the dependent variable. Then these mean returns are
regressed with respect to the previously estimated betas. For being CAPM efficient, the
coefficients of the regression must be or at least not significantly differ from the following:
= 0
= −
Cross-sectional regression must be checked for heteroscedasticity. For this, the
regression run must consist of the same dependent variable, but with new independent
variables.
DATA ANALYSIS
Research has included two parts. First one, as shortly mentioned in the previous
section, includes estimation of betas of each security by using 30 ranges of observations for
thirty stocks collected over 36 months’ time periods. Below table demonstrates values of Beta
for each security as calculated. Values of the estimated beta range between 0.118 and 0.858
with a standard deviation of 0.185. Values are statistically significant at 95% level.

Table 1 Stock beta coefficient estimates (Time-series regression outputs)
Company symbols Beta estimates
0.8090
0.8580
0.7380
0.6910
0.7260
0.6610
0.5630
0.7160
0.7240
0.7570
0.7170
0.3550
0.3790
0.6950
0.3980
0.3570
0.6280
0.1320
0.4290
0.5520
0.4980
0.6150
0.7950
0.5020
0.6260
0.6020
0.7050
0.5270
0.1180
0.6310
AA
AXP
BA
CAT
DD
DIS
G.E
HD
HPQ
IBM
INTC
JNJ
KO
MCD
MMM
MRK
MSFT
PG
T
UTX
WMT
XOM
JPM
PFE
TRV
BAC
CSCO
CVX
UNH
VZ

Cross-sectional regression has provided following results:
A linear curve has been traced. Descriptions of the curve are given in the below table:
Model Description
Model Name MOD_1
Dependent
Variable
1
1
Mean returns
Equation Linear
BetaIndependent Variable
Constant Included
UnspecifiedVariable Whose Values Label Observations
in Plots
Table 2. Result output from the cross-sectional regression
Coefficient
Value
γ0 γ1
-0.023 -0.004
R-Squared: 0.006
F-statistic is 0.165 on 1 and 28 degrees of freedom
As per the mentioned requisites, gamma-0 must be zero and in line to this requisite,
the obtained value of intercept or the constant is not significantly different from zero or
almost equal to zero. Thus, CAPM hypothesis should not be rejected on the basis of intercept
criterion only.
REFERENCES
Books
Bossaerts, P., 2003. Testing CAPM in Real Markets: Implications from Experiments.
California Institute of Technology.
Brigham, E. F. and Ehrhardt, M. C. 2011. Financial Management: Theory and Practice, 13 th
Ed. USA: Cengag Learning.
Damodar, N., 2003. Basic Econometrics, 4th
Ed. United States Military Academy, West
Point.
Doherty, N. A. 2000. Integrated Risk Management: Techniques and Strategies. USA:
McGraw Hill Professional.

Economic research, 2013. 5-Year Treasury Constant Maturity Rate (GS5). [online] Available
through: <http://research.stlouisfed.org/fred2/series/GS5> [Accessed on 15
2013].
th
Jan,
Gill, J., and Johnson, P., 2002. Research Methods for Managers. 3rd ed. London: SAGE
Publications Ltd.
Mertens, E., 2002. The CAPM and Regression Tests. University of Basel.
Michilidis, G., Tsopoglou, S., Papanastasiou, D. and Mariola, E., 2006. Testing the Capital
Asset Pricing Model (CAPM): The Case of the Emerging Greek Securities Market.
International Research Journal of Finance and Economics, 4.
Rschner, M. K. 2008. Limitations of Capital Asset Pricing Model. Germany: GRIN Verlag.
SMR, 2013. DOW JONES 30 COMPANIES. [Online] Available through: <
http://www.stockmarketsreview.com/companies_dowjones30/> [Accessed on 15
Jan, 2013].
th
Yahoo finance, 2013. [online] Available through: < http://in.finance.yahoo.com/> [Accessed
th
on 15 Jan, 2013].

APPENDIX
DOW 30 Index constituents (SMR, 2013)
Company
1 MMM 3M Co
2 AA Alcoa Inc
3
4
AXP American Express Co
T AT&T Inc
5
6
BAC Bank of America Corp
BA Boeing Co
7
8
9
CAT Caterpillar Inc
CVX Chevron Corp
CSCO Cisco Systems Inc
DD E. I. du Pont de Nemours and Co
XOM Exxon Mobil Corp
GE General Electric Co
HPQ Hewlett-Packard Co
HD Home Depot Inc
INTC Intel Corp
IBM International Business Machines Co...
JNJ Johnson & Johnson
JPM JPMorgan Chase and Co
MCD McDonald's Corp
MRK Merck & Co Inc
MSFT Microsoft Corp
PFE Pfizer Inc
PG Procter & Gamble Co
KO The Coca-Cola Co
TRV Travelers Companies Inc
UTX United Technologies Corp
UNH UnitedHealth Group Inc
VZ Verizon Communications Inc
WMT Wal-Mart Stores Inc
DIS Walt Disney Co
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30

T-bill return for four weak (Economic research, 2013)
Title: 5-Year Treasury Constant Maturity Rate
Series ID:
Source:
Release:
Seasonal Adjustment:
Frequency:
Units:
GS5
Board of Governors of the Federal Reserve System
H.15 Selected Interest Rates
Not Seasonally Adjusted
Monthly
Percent
Date Range:
Last Updated:
Notes:
2002-01-01 to 2005-12-01
2013-01-08 4:01 PM CST
Averages of business days. For further information regarding treasury
constant maturity data, please refer to
http://www.federalreserve.gov/releases/h15/current/h15.pdf and
VALUEDATE
01-01-02 4.34
4.3
4.74
4.65
4.49
4.19
3.81
3.29
2.94
2.95
3.05
3.03
3.05
2.9
2.78
2.93
2.52
2.27
2.87
3.37
3.18
3.19
3.29
3.27
3.12
3.07
2.79
3.39
3.85
3.93
3.69
3.47
3.36
3.35
3.53
3.6
3.71
3.77
4.17
4
01-02-02
01-03-02
01-04-02
01-05-02
01-06-02
01-07-02
01-08-02
01-09-02
01-10-02
01-11-02
01-12-02
01-01-03
01-02-03
01-03-03
01-04-03
01-05-03
01-06-03
01-07-03
01-08-03
01-09-03
01-10-03
01-11-03
01-12-03
01-01-04
01-02-04
01-03-04
01-04-04
01-05-04
01-06-04
01-07-04
01-08-04
01-09-04
01-10-04
01-11-04
01-12-04
01-01-05
01-02-05
01-03-05
01-04-05
01-05-05
01-06-05
01-07-05
01-08-05
01-09-05
01-10-05
01-11-05
01-12-05
3.85
3.77
3.98
4.12
4.01
4.33
4.45
4.39

Realized Rates of Return for 30 stocks, 1 risk-free asset, and S&P 500 Index (Yahoo finance, 2013)
Date AA AXP BA CAT DD DIS GE HD HPQ IBM INTC
01-12-04 -7.59% 1.19% 2.39% 6.51% 8.23% 4.33% 3.85% 2.36% 5.25% 4.60% 4.53%
01-11-04
01-10-04
01-09-04
02-08-04
01-07-04
01-06-04
03-05-04
01-04-04
01-03-04
02-02-04
02-01-04
01-12-03
03-11-03
01-10-03
02-09-03
01-08-03
01-07-03
02-06-03
01-05-03
01-04-03
03-03-03
03-02-03
02-01-03
02-12-02
01-11-02
01-10-02
03-09-02
01-08-02
01-07-02
03-06-02
01-05-02
01-04-02
01-03-02
01-02-02
5.05%
-3.25%
3.77%
1.54%
-3.00%
5.49%
2.31%
-11.37%
-7.42%
10.13%
-10.08%
15.84%
4.43%
20.64%
-8.37%
3.42%
8.91%
3.61%
7.28%
19.16%
-5.49%
4.50%
-13.22%
-10.83%
16.57%
14.30%
-23.08%
-7.26%
-17.94%
-5.22%
3.24%
-9.82%
0.46%
5.24%
4.96%
3.38%
2.87%
-0.47%
-2.19%
1.55%
3.56%
-5.58%
-2.75%
3.04%
7.48%
5.75%
-2.61%
4.39%
0.00%
2.00%
5.91%
0.35%
10.05%
14.22%
-1.06%
-5.48%
0.49%
-8.96%
7.04%
16.94%
-13.54%
2.26%
-2.72%
-14.58%
3.67%
0.33%
12.39%
1.68%
-0.37%
-1.50%
0.61%
1.79%
5.87%
2.34%
-4.83%
2.74%
2.20%
-5.84%
-1.06%
11.97%
-2.91%
9.63%
-0.95%
-3.81%
-7.26%
0.39%
8.95%
18.29%
-3.59%
-14.87%
-9.04%
-4.87%
11.01%
29.36%
-18.74%
-10.60%
-8.50%
-11.08%
10.43%
-16.44%
-1.07%
1.04%
13.66%
0.64%
10.66%
-1.06%
-7.03%
5.43%
-3.06%
-1.24%
4.38%
-3.05%
-5.45%
9.16%
3.78%
6.92%
-4.15%
6.48%
21.95%
6.70%
-0.85%
7.61%
4.71%
6.86%
-3.10%
-8.38%
22.13%
10.78%
-14.70%
-2.40%
-7.90%
-6.36%
-4.29%
-3.33%
2.43%
10.37%
6.53%
0.16%
1.29%
-0.58%
-3.50%
2.84%
1.42%
1.71%
-6.35%
3.51%
-4.33%
10.71%
3.50%
0.99%
-10.58%
2.62%
5.54%
-1.18%
-0.13%
9.46%
5.95%
-2.22%
-10.67%
-4.97%
9.07%
14.34%
-10.51%
-3.02%
-5.61%
-3.46%
4.17%
-5.64%
0.67%
6.88%
6.59%
11.82%
0.45%
-2.74%
-9.44%
8.62%
1.91%
-7.82%
-5.83%
10.55%
2.86%
2.03%
1.96%
12.27%
-1.61%
-6.45%
10.98%
0.46%
5.32%
9.65%
-0.20%
-2.54%
7.27%
-16.67%
18.67%
10.30%
-3.46%
-11.53%
-6.17%
-17.54%
-1.15%
0.45%
0.35%
9.22%
3.64%
1.59%
3.03%
-1.41%
2.66%
4.74%
3.88%
-1.86%
-6.15%
-2.71%
8.56%
8.74%
-1.13%
-2.71%
1.44%
3.97%
-0.82%
0.58%
-2.54%
15.44%
6.06%
4.77%
-4.99%
-9.51%
7.36%
2.46%
-17.69%
-6.34%
10.84%
-6.14%
-1.27%
-15.65%
-2.86%
4.09%
1.84%
4.79%
7.24%
8.67%
-4.19%
-1.80%
2.08%
-5.82%
3.08%
2.39%
-0.07%
-3.26%
-0.84%
16.41%
-0.78%
3.08%
-5.77%
2.12%
15.49%
15.47%
4.18%
12.19%
-12.96%
-8.82%
-8.58%
10.66%
-20.63%
6.61%
-15.92%
-11.77%
-10.10%
-4.62%
-2.68%
-0.18%
7.16%
-0.47%
5.27%
-11.23%
-4.52%
-0.26%
7.80%
-13.74%
0.93%
-4.55%
3.60%
6.03%
-2.56%
15.23%
-2.48%
-5.85%
-0.58%
9.62%
19.61%
4.87%
-1.43%
-8.94%
0.26%
-10.48%
23.32%
35.39%
-12.56%
-5.11%
-7.43%
-19.57%
11.67%
-4.69%
-10.47%
-9.01%
5.21%
4.68%
1.23%
-2.52%
-1.23%
-0.49%
0.67%
-3.99%
-4.83%
-2.60%
7.07%
2.37%
1.36%
1.31%
7.71%
1.13%
-1.52%
-6.28%
3.89%
8.24%
0.62%
-0.12%
0.89%
-10.83%
10.31%
35.39%
-22.66%
7.31%
-2.22%
-10.50%
-3.76%
-19.47%
6.00%
-8.94%
0.72%
10.93%
-5.76%
-12.53%
-11.65%
-3.35%
11.16%
-5.44%
-6.85%
-4.20%
-4.74%
-4.45%
1.85%
19.74%
-3.75%
14.92%
19.65%
-0.06%
13.30%
12.95%
-5.57%
10.30%
0.56%
-25.43%
20.82%
24.59%
-16.73%
-11.13%
2.81%
-33.83%
-3.42%
-5.89%
6.50%
-18.47%
Mean
returns 0.34%
0.8090
1.59%
0.8580
-0.24%
0.7380
2.42%
0.6910
0.77%
0.7260
1.23%
0.6610
0.40%
0.5630
0.00%
0.7160
0.57%
0.7240
0.23%
0.7570
-0.23%
0.7170Beta

Date JNJ KO MCD
4.29%
7.41%
4.01%
3.74%
-1.77%
5.80%
-1.55%
-3.05%
-4.70%
0.99%
9.93%
3.65%
-3.14%
4.15%
6.17%
5.04%
-2.59%
4.29%
17.81%
9.48%
18.31%
6.20%
-4.38%
-11.46%
-13.05%
3.56%
2.53%
-25.69%
MMM
3.11%
3.06%
-3.00%
-2.90%
0.45%
-8.50%
6.45%
-1.80%
5.64%
4.94%
-0.92%
-6.98%
7.57%
0.65%
14.19%
-3.04%
2.09%
8.70%
1.98%
0.87%
-3.07%
3.73%
1.17%
1.01%
-5.04%
2.79%
15.43%
MRK
16.33%
-10.53%
-5.13%
-25.98%
-0.83%
-4.54%
1.20%
0.62%
6.36%
-7.36%
0.99%
3.05%
14.78%
-8.24%
-12.58%
1.33%
-3.82%
-8.72%
9.65%
-4.47%
6.23%
4.57%
-4.79%
-2.15%
-4.11%
9.51%
18.68%
-8.85%
MSFT
-0.31%
6.80%
1.18%
1.29%
-3.90%
-0.27%
8.92%
0.35%
4.82%
-6.01%
-4.06%
1.05%
6.46%
-1.65%
-5.44%
4.81%
0.40%
3.02%
4.16%
-3.75%
5.65%
2.16%
0.17%
-8.21%
-10.37%
7.89%
22.24%
-10.85%
PG T UTX
5.89%
5.52%
-0.61%
-0.56%
0.82%
2.22%
8.12%
-1.50%
-0.03%
-6.31%
-3.23%
0.81%
10.58%
1.60%
9.59%
-3.71%
7.04%
6.21%
3.77%
10.90%
6.97%
-1.37%
-7.51%
2.65%
-0.82%
1.67%
9.19%
-4.89%
WMT
1.69%
-3.44%
1.35%
1.03%
-0.42%
0.99%
-5.81%
-1.99%
-4.51%
0.44%
10.61%
1.52%
-4.50%
-5.61%
5.72%
-5.62%
5.84%
4.16%
2.19%
-6.59%
8.25%
8.43%
0.55%
-5.35%
-6.15%
0.65%
8.75%
-7.80%
XOM
0.02%
4.69%
1.86%
4.82%
0.18%
4.25%
2.67%
2.30%
2.30%
-1.38%
4.03%
-0.51%
13.26%
-0.34%
-0.07%
-2.93%
6.70%
-0.93%
-1.32%
4.13%
0.71%
2.74%
0.29%
-2.26%
0.40%
4.08%
5.49%
-9.99%
01-12-04
01-11-04
01-10-04
01-09-04
02-08-04
01-07-04
01-06-04
03-05-04
01-04-04
01-03-04
02-02-04
02-01-04
01-12-03
03-11-03
01-10-03
02-09-03
01-08-03
01-07-03
02-06-03
01-05-03
01-04-03
03-03-03
03-02-03
02-01-03
02-12-02
01-11-02
01-10-02
03-09-02
5.14%
3.81%
3.64%
-3.04%
5.65%
-0.76%
-0.02%
3.64%
6.54%
-5.91%
1.35%
3.40%
4.79%
-1.57%
1.62%
-0.10%
-3.83%
0.18%
-4.87%
-3.16%
-2.60%
10.33%
-1.77%
-0.20%
-5.79%
-2.63%
8.63%
-0.41%
5.95%
-2.68%
1.52%
-9.91%
1.92%
-13.11%
-1.20%
1.52%
0.56%
1.18%
1.46%
-2.99%
9.12%
0.72%
8.00%
-0.78%
-3.23%
-3.13%
2.35%
12.78%
-0.19%
1.24%
-0.58%
-7.72%
-3.97%
-1.36%
-3.08%
-5.60%
2.98%
4.50%
-4.99%
-3.31%
7.34%
-3.76%
0.98%
1.90%
1.37%
2.29%
1.42%
1.68%
3.77%
-2.09%
6.40%
6.34%
-0.67%
-0.95%
-2.88%
2.20%
1.36%
8.78%
-4.33%
0.06%
1.65%
-4.42%
-0.61%
0.82%
-3.37%
7.78%
-3.33%
-1.15%
3.30%
-0.66%
11.54%
7.78%
3.96%
-5.31%
4.28%
-0.92%
9.76%
0.19%
12.14%
-8.21%
13.51%
-3.51%
11.90%
13.09%
8.83%
-9.06%
-12.27%
-4.26%
-3.10%
15.08%
-12.85%
-7.92%
-
11.98%
-0.23%01-08-02
01-07-02
03-06-02
01-05-02
01-04-02
01-03-02
01-02-02
Mean returns
Beta
3.62%
0.66%
-14.83%
-3.60%
-1.68%
6.65%
6.21%
0.55%
0.3550
2.12%
-10.82%
1.20%
0.10%
6.20%
10.75%
8.29%
0.19%
0.3790
-3.99%
-13.00%
-4.97%
5.42%
2.32%
6.35%
-3.97%
0.98%
0.6950
1.86%
-2.05%
-10.74%
5.07%
-5.63%
-5.59%
3.66%
-0.92%
0.3570
2.25%
-12.29%
7.46%
-2.57%
-13.34%
3.34%
-8.40%
0.09%
0.6280
-0.38%
0.18%
0.50%
-0.79%
0.59%
6.27%
3.79%
1.09%
0.1320
-10.31%
-7.73%
5.50%
-4.01%
-7.57%
4.99%
12.70%
1.17%
0.4290
-14.21%
2.36%
-1.43%
-1.48%
-5.44%
1.70%
6.55%
1.46%
0.5520
8.74%
-10.60%
1.81%
-3.15%
-8.88%
-1.02%
3.37%
-0.15%
0.4980
-2.97%
-10.14%
2.48%
-0.03%
-8.36%
6.12%
6.41%
1.11%
0.6150
2.31%
-1.95%
0.21%
9.37%
-2.48%
6.83%
1.45%
0.3980

Date JPM PFE TRV
2.22%
7.41%
2.75%
-4.10%
-6.43%
-8.56%
2.72%
-2.44%
2.18%
-5.71%
1.46%
6.25%
7.68%
-2.69%
2.94%
7.38%
-1.16%
-3.67%
0.60%
6.52%
7.97%
3.95%
-5.45%
-4.12%
-7.81%
13.53%
14.23%
-4.65%
-2.54%
-19.81%
-8.00%
-14.44%
8.63%
-5.62%
9.42%
0.02%
BAC
2.55%
3.32%
3.37%
-2.71%
5.82%
0.45%
2.80%
3.28%
-0.61%
-0.19%
0.58%
1.27%
7.74%
-0.38%
-2.95%
-0.54%
-4.01%
4.46%
7.44%
0.18%
10.80%
-2.55%
-1.16%
0.70%
0.20%
0.39%
9.42%
-8.14%
5.37%
-5.47%
-6.44%
4.58%
6.57%
6.37%
2.41%
1.57%
CSCO
3.05%
-2.43%
6.14%
-3.49%
-10.33%
-11.74%
5.94%
7.00%
-11.32%
1.79%
-9.94%
6.13%
6.72%
8.49%
6.84%
2.33%
-1.81%
16.08%
2.34%
9.42%
15.52%
-7.13%
4.58%
2.06%
-12.25%
33.43%
6.74%
-24.19%
4.80%
-5.44%
-11.64%
7.73%
-13.44%
18.63%
-27.95%
0.65%
CVX
-3.82%
3.69%
-1.10%
10.05%
2.78%
1.62%
4.11%
-0.41%
4.23%
-0.66%
3.19%
-0.06%
15.04%
2.07%
3.97%
-1.93%
2.04%
-0.11%
1.77%
14.10%
-2.82%
0.73%
0.74%
-3.15%
-0.79%
0.17%
-2.36%
-9.64%
3.11%
-15.24%
1.43%
1.39%
-3.94%
6.89%
1.66%
1.11%
UNH
6.25%
14.43%
-1.81%
11.50%
5.15%
1.04%
-4.61%
6.15%
-4.60%
3.98%
1.85%
4.63%
7.95%
5.91%
1.12%
1.82%
-5.10%
3.66%
4.75%
4.13%
0.50%
10.59%
-5.66%
5.26%
2.52%
-10.44%
4.27%
-1.28%
0.76%
-4.25%
0.83%
3.43%
14.88%
5.48%
-2.53%
2.64%
VZ S&P 500
3.01%
4.45%
1.29%
1.00%
0.25%
-3.22%
1.85%
1.71%
-1.89%
-1.32%
1.35%
1.97%
5.04%
1.09%
5.35%
-1.09%
2.06%
1.81%
1.06%
5.48%
8.45%
0.22%
-1.35%
-2.46%
-5.66%
6.17%
8.22%
-10.48%
0.69%
-7.88%
-7.38%
-0.60%
-5.81%
3.32%
-1.79%
0.43%
rf
01-12-04
01-11-04
01-10-04
01-09-04
02-08-04
01-07-04
01-06-04
03-05-04
01-04-04
01-03-04
02-02-04
02-01-04
01-12-03
03-11-03
01-10-03
02-09-03
01-08-03
01-07-03
02-06-03
01-05-03
01-04-03
03-03-03
03-02-03
02-01-03
02-12-02
01-11-02
01-10-02
03-09-02
01-08-02
01-07-02
03-06-02
01-05-02
01-04-02
01-03-02
01-02-02
Mean
3.62%
-2.47%
-2.01%
0.38%
6.03%
-2.86%
5.24%
-2.01%
-9.64%
2.26%
5.46%
6.89%
3.77%
-1.39%
5.59%
0.30%
-2.37%
3.56%
4.02%
11.95%
25.60%
4.51%
-2.84%
-1.35%
-4.65%
21.36%
11.11%
-28.04%
5.77%
-25.61%
-5.63%
2.41%
-0.59%
21.86%
-14.09%
1.32%
-3.17%
-3.50%
-5.41%
-6.33%
2.78%
-6.78%
-3.00%
-0.69%
2.01%
-4.36%
0.51%
3.69%
5.22%
6.77%
4.02%
1.51%
-9.90%
-2.31%
10.08%
1.34%
-1.32%
4.53%
-1.79%
-0.19%
-3.04%
-0.37%
9.44%
-12.26%
2.67%
-7.56%
1.16%
-4.47%
-8.52%
-2.99%
-1.40%
-0.96%
-1.73%
5.43%
0.24%
0.33%
1.83%
7.69%
4.63%
-8.35%
4.34%
-4.69%
3.99%
6.21%
6.84%
-2.26%
4.73%
-8.13%
0.91%
-10.43%
4.23%
1.26%
6.89%
2.22%
-9.66%
-0.31%
-7.47%
10.88%
39.25%
-11.45%
-6.07%
-16.99%
-6.62%
7.19%
-12.23%
-1.52%
0.99%
0.35%
3.60%
3.53%
3.35%
3.36%
3.47%
3.69%
3.93%
3.85%
3.39%
2.79%
3.07%
3.12%
3.27%
3.29%
3.19%
3.18%
3.37%
2.87%
2.27%
2.52%
2.93%
2.78%
2.90%
3.05%
3.03%
3.05%
2.95%
2.94%
3.29%
3.81%
4.19%
4.49%
4.65%
4.74%
4.30%
3.38%
returns
Beta 0.7950 0.5020 0.6260 0.6020 0.7050 0.5270 0.1180 0.6310

Beta estimates
Coefficients a
Unstandardized
Coefficients
Standardized
Coefficients
Model B Std. Error Beta t Sig.
.065
.000
1 (Constant) .024 .013
.237
1.911
7.896MP 1.875 .809
a. Dependent Variable: AA
Coefficients a
Unstandardized Standardized
CoefficientsCoefficients
BModel Std. Error
.007
Beta t Sig.
.011
.000
1 (Constant) .019 2.696
9.615MP 1.266 .132 .858
a. Dependent Variable: AXP
Coefficients a
BModel Std. Error
.014
Beta t Sig.
.454
.000
1 (Constant) .010 .757
6.288MP 1.593 .253 .738
a. Dependent Variable: BA

Unstandardized
Coefficients
Standardized
Coefficients
Model
1
B Std. Error Beta t Sig.
.670
.000
(Constant) -.005 .012
.217
-.430
3.917MP .851 .563
a. Dependent Variable: G.E
Coefficients a
BModel Std. Error
.013
Beta t Sig.
.565
.000
1 (Constant) .007 .582
5.897MP 1.417 .240 .716
a. Dependent Variable: HD
Coefficients a
BModel Std. Error
.016
Beta t Sig.
.132
.000
1 (Constant) .025 1.546
6.023MP 1.820 .302 .724
a. Dependent Variable: HPQ
Coefficients a
CoefficientsModel Coefficients t Sig.

B Std. Error
.013
Beta
1 (Constant) .015 1.172
6.654
.250
.000MP 1.597 .240 .757
a. Dependent Variable: IBM
Coefficients a
BModel Std. Error
.019
Beta t Sig.
.194
.000
1 (Constant) .025 1.326
5.911MP 2.103 .356 .717
a. Dependent Variable: INTC
Coefficients a
BModel Std. Error
.009
Beta t Sig.
.080
.036
1 (Constant) -.017 -1.805
2.184MP .386 .177 .355
a. Dependent Variable: JNJ
Coefficients a
BModel Std. Error
.011
Beta t Sig.
.1061 (Constant) -.018 -1.660

Coefficients a
Unstandardized
Coefficients
Standardized
Coefficients
.740
.000
1 (Constant) -.004 .012
.215
-.334
4.642MP .998 .628
a. Dependent Variable: MSFT
Coefficients a
BModel Std. Error
.007
Beta t Sig.
.006
.451
1 (Constant) -.020 -2.911
.762MP .098 .129 .132
a. Dependent Variable: PG
Coefficients a
BModel Std. Error
.015
Beta t Sig.
.958
.010
1 (Constant) .001 .053
2.731MP .787 .288 .429
a. Dependent Variable: T
Coefficients a

Unstandardized
Coefficients
Standardized
Coefficients
Model
1
B Std. Error Beta t Sig.
.927
.001
(Constant) .001 .010
.181
.092
3.801MP .689 .552
a. Dependent Variable: UTX
Coefficients a
BModel Std. Error
.010
Beta t Sig.
.102
.002
1 (Constant) -.017 -1.682
3.300MP .626 .190 .498
a. Dependent Variable: WMT
Coefficients a
BModel Std. Error
.008
Beta t Sig.
.569
.000
1 (Constant) -.004 -.575
4.478MP .631 .141 .615
a. Dependent Variable: XOM
Coefficients a

B Std. Error
.013
Beta
1 (Constant) .034 2.568
7.531
.015
.000MP 1.890 .251 .795
a. Dependent Variable: JPM
Coefficients a
BModel Std. Error
.010
Beta t Sig.
.010
.002
1 (Constant) -.026 -2.725
3.338MP .596 .178 .502
a. Dependent Variable: PFE
Coefficients a
BModel Std. Error
.012
Beta t Sig.
.826
.000
1 (Constant) -.003 -.222
4.614MP 1.059 .230 .626
a. Dependent Variable: TRV
Coefficients a

Coefficients a
Unstandardized
Coefficients
Standardized
Coefficients
.011
.000
1 (Constant) .041 .015
.285
2.705
4.671MP 1.332 .631
a. Dependent Variable: VZ
Second regression Analysis report
Model Summary and Parameter Estimates
Dependent Variable: mean excess return ( −
Equatio Model Summary
)
Parameter Estimates
Constant b1n R Square F df1
1
df2
28
Sig.
.687Linear .006 .165 -.023 -.004
The independent variable is beta.

Financial Econometrics Evaluation of CAPM Model Assignment Sample

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Financial Econometrics Evaluation of CAPM Model Assignment Sample