The first step in using the Capital Asset Pricing Model (CAPM) is to estimate the stocks beta using the market model. The market model can be written as Rit = i + i Rmt + uit where Rit is the excess return for security i at time t, Rmt is the excess return on a proxy for the market portfolio at time t, and uit is a random disturbance term. The coefficient i in this case is also the CAPM beta for security i. Suppose that you had estimated the market model and found that the estimated value of beta for a stock was 1.5. The standard error of is was 0.66. The model is estimated over 62 daily observations

An analyst has told you that the systematic risk of this security is twice as high as the market. (i) Please write out the null and alternative hypothesis. (ii) Given a 5% level significance level, please test your hypothesis. What do you conclude? (Note: t60,10% = 1.2958, t60,5% = 1.6706, t60,2.5% = 2.0003, t60,1% = 2.3901.)