Francisco Javier Parra Rodríguez
Universidad de Cantabria (UNICAN), España
The capital asset pricing model provides a theoretical structure for the pricing of assets with uncertain returns. The security market line (SML) and its relation to expected return (the difference between the expected rate of return and the risk-free rate) and systematic risk ($\beta$) show how the market must price individual securities in relation to their security risk class. The value of “Beta” may be calculated in regression analysis utilizing historic data, assuming uncorrelacted the expected return market and the random term on OLS.
In this paper, a multivariate model is estimated by Regression Band Spectrum (RBS) when the random term are correlated to the market premium.
Classification JEL (Journal of Economic Literature): E22, E44,G11