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Doriana Cocoli Testing CAPM We see that the coefficient in front of beta is -.

0033515, when we regress average excess returns corrected (proxy for expected returns) on betas. We are looking for a positive relation, though; therefore based on our sample CAPM does not hold.

However, when we regress the standard deviations of excess returns on betas, we get a coefficient of .074787 in front of beta, which is positive and makes us say that CAPM (according to our sample) has a better explanatory power over a simple measure of risk.