It is proved that OLS estimation of the market model is the empirical counterpart of the CAPM under classical Gauss–Markov assumptions. Show that: (i) E(ui t ) = 0, (ii) Var (u_it ) = σ²_i (1 − ρ²_iM) ≡ σ²_ui is constant, and (iii) Cov (u_it , u_is ) = 0 for all t ≠ s.