STAT244.Lecture.04 4

STAT244.Lecture.04 4 - Sharpe-Lintner CAPM: Let Zi = Ri Rf...

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Sharpe-Lintner CAPM: I Let Z i = R i - R f ; Z m = R m - R f ; E ( Z i ) = β im E ( Z m ); β im = Cov ( Z i , Zm ) Var ( Zm ) I let Z t be ( N × 1) vector of excess returns; Model: Z t = α + β Z mt + ± t I Test H 0 : α = 0; use F - test : F = ( T - N - 1 N ) ± 1 + ˆ μ 2 m ˆ σ 2 m ² - 1 ˆ α ˆ Σ - 1 ˆ α , where ˆ α, ˆ μ m , ˆ σ 2 m and ˆ Σ are MLE under normality. This is a standard result in multivariate regression; distribution is F ( N , T - N
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This note was uploaded on 10/16/2010 for the course STAT 244 taught by Professor Dr.velu during the Summer '10 term at Stanford.

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