BBF305/03: Investment and Portfolio Management Assignment, WOU, Malaysia Calculate the betas for both stocks and Discuss the problems encounters when testing the CAPM empirically

University Wawasan Open University (WOU)
Subject BBF305/03 Investment And Portfolio Management

QUESTION 1 

The table below depicts the expected return for CCC Berhad and XXX Berhad for April and May:

BBF305/03: Investment and Portfolio Management Assignment, WOU, Malaysia Calculate the betas for both stocks and Discuss the problems encounters when testing the CAPM empirically

a) Calculate the betas for both stocks.

b) Discuss the problems encounters when testing the CAPM empirically.

c) In light of the problems in CAPM, the APT model was proposed as an alternative. Discuss how the APT overcomes the shortcoming of CAPM.

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