The capital asset pricing model is given by R - R_F = α + β(R_M - R_f)+ ε,where R_M = expected return on the market,R_f= risk-free market return,and R = expected return on a stock or portfolio of interest.The response variable in this model is ________. A) R B) R - R_f C) R_M D) R_M- R_f

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Quizplus · Accepted Answer

The response variable in the CAPM model is R - R_f, which is the expected excess return on a stock or portfolio above the risk-free rate. This measures the compensation for taking on systematic risk within the market.

The Capital Asset Pricing Model Is Given by R -