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Problem 9 Using monthly data for 1950:01 to 2020:12 from Kenneth French’s Data Library, estimation of a system of CAPM r
Posted: Wed May 11, 2022 12:15 pm
by answerhappygod
- Problem 9 Using Monthly Data For 1950 01 To 2020 12 From Kenneth French S Data Library Estimation Of A System Of Capm R 1 (117.69 KiB) Viewed 33 times
Problem 9 Using monthly data for 1950:01 to 2020:12 from Kenneth French’s Data Library, estimation of a system of CAPM regressions for a set of ten industry portfolio excess returns in R produces a GRS statistic of 5.28 with a p-value of 1.48e-7. (a) Outline the specification of the system of CAPM regressions Solution: RX i,t = Qi + Bi, MKTMKT+ + Ei,t for i = 1, ..., n; t = 1, ...,T (6) What null hypothesis does the GRS statistic test? Solution: Ho :Q1 = 42 = ... = An = 0 = (c) Do the data indicate that the CAPM is an adequate model of systematic risk for the group of industry portfolios? Solution: Hint: based on the GRS statistic and its p-value, can you reject the null hypothesis in (b)?