Empirically, CAPM model is tested by

a.

Running a linear regression of historical returns of a stock on historical returns of the market portfolio

b.

Running linear regressions of historical returns of stocks on historicalreturns of the market portfolio and then running a linear regression of historical mean of stock returns on stocks' beta found in the first regressions

c.

Running a linear regression of historical mean of stock returns on stocks' beta and then running linear regressions of historical returns of stocks on historical returns of the market portfolio

d.

Running a linear regression of historical mean of stock returns on stocks' beta

e.

None of the above

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The detailed answer for the above question is provided below The correct option is c Running a linea... View the full answer