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The first step in using the Capital Asset Pricing Model (CAPM) is to estimate the...

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Finance

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.

question - interpret the estimated coefficient = 1.5.

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