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Two, three, four five, Right? The question is this. 5a. Write down the steps to show how you conduct the long/short strategy based on CAPM in practice. Step 1 Do you need to estimate the risk-free rate? By using the 10-year Treasury bond. Step 2 You need to estimate the market return (RM) because we understand the CAPM models. You need RM and how do you estimate the market returns? We are using the index to compute the market return. Step 3 We need to actually estimate our beta. The beta we use the characteristic line. The relationship between the individual’s risky asset or risky stock and ...
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