- CFA Exams
- CFA Level I Exam
- Topic 4. Corporate Issuers
- Learning Module 18. Cost of Capital: Advanced Topics
- Subject 3. The Equity Risk Premium
CFA Practice Question
The decision to use a particular index to represent the market portfolio will affect the estimation of:
II. beta estimate for a particular stock.
I. equity risk premium.
II. beta estimate for a particular stock.
Correct Answer: I and II
The decision affects both estimates.
The value of β estimated depends on a few choices too: which market index to be used? what's the data period? the frequency of observations?
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