The capital asset pricing model determines the beta coefficient for a firm by regressing the variability in the firm's common stock against the variability in an index of all common stocks.

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The capital asset pricing model (CAPM) uses regression analysis to determine a firm's beta coefficient by comparing the variability of the firm's stock returns to the variability of a market index, typically representing all common stocks.

The Capital Asset Pricing Model Determines the Beta Coefficient for a Firm