Fama and MacBeth (1973) found that the relationship between average excess returns and betas was
A) quasilinear.
B) nonexistent.
C) refutes earlier studies.
D) linear and as expected, based on earlier studies.
E) Fama and MacBeth did not examine the relationship between excess returns and beta.

Question

Quizplus · Accepted Answer

Fama and MacBeth (1973) found that the relationship between average excess returns and betas was linear and consistent with earlier studies, supporting the Capital Asset Pricing Model (CAPM) which predicts a linear relationship between these variables.

Fama and MacBeth (1973) Found That the Relationship Between Average