Hi all, Can somebody explain this to me plz? What rates do I add to CAPM ? Many thanks, S
Expanded CAPM = CAPM + Premium for small size + Premium for company-specific risk Since CAPM = Rf + β (Rm – Rf) So, Expanded CAPM = Rf + β (Rm – Rf) + Premium for small size + Premium for company-specific risk You don’t have to calculate the premiums for size and company specific risks, hopefully they’ll be given in the vignette. I hope that answers your question. In case of any problem or if you need further elaboration, feel free to ask! Good Luck!
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FFM and eCAPM are totally different. They use different factors.