Finance lab problem
Create a strategy of buying low beta and shorting low beta stocks to create beta=0 portfolio. Replicate and extend the results of Black, Jensen, and Scholes. “The Capital Asset Pricing Model: Some Empirical Tests,” in Jensen, Studies in the Theory of Capital Markets. (New York, 1972).
Create the Fama-MacBeth procedure for testing the CAPM. Extend the test by testing for the CAPM adjusted for taxes. Fama, Eugene and MacBeth, J. “Risk, Return, and Equilibrium: Empirical Tests,” Journal of Political Economy, May/June 1973. Litzenberger, R.H. and Ramaswamy K. “The Effect of Personal Taxes and Dividends on Capital Asset Prices: Theory and Empirical Evidence,” Journal of Financial Economics, June 1979.