Risk premium of stock

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Comments (2)

bkiyanga in Buenos Aires, Argentina

77 months ago

The capital asset pricing model states that the rate of return of an asset is proportional to the asset's beta time the risk premium :R=Rf+ B(Rm-rf).How is the market return Rm calculated in practice?

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Krepp in Burnaby, British Columbia

75 months ago

bkiyanga in Buenos Aires, Argentina said: The capital asset pricing model states that the rate of return of an asset is proportional to the asset's beta time the risk premium :R=Rf+ B(Rm-rf).How is the market return Rm calculated in practice?

I believe its a historic average; convention claims the market risk premium is 4.5% (Rm - Rf).

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