3.3Investment Foundations · Mission 4
What Beta Measures
Build CAPM, test beta against positive and negative market moves, and inspect the uncertainty inside a historical regression estimate.
Your mission
Interpret beta as estimated market exposure for a diversified investor without confusing it with total risk or investment quality.
22–25 minutesFive guided missionsQualified Beta Reading
Guided equity-risk lab
0 of 5 missions complete
0%
OPS Guide
CAPM estimates required return from a risk-free rate, beta, and an equity risk premium. Define each input before calculating.
Inspect all three CAPM inputs, then calculate required return.
Mission 1 of 5 · CAPM
Build the required-return model
Direct definition
The Capital Asset Pricing Model, or CAPM, estimates the required return for a stock as the risk-free rate plus beta times the equity risk premium.
Inspect every input in this OPS teaching case, then build Northstar’s required return. These inputs are illustrative, not current market data.
Required return = 4% + 1.20 × 5%
?
Risk-free rate
4%
The return on an investment treated as free of default risk for the relevant horizon.
Inspect all three CAPM inputs, then calculate required return.
Lesson referenceProgress, workbench and sourcesHide
Portfolio Workbench
Build while you learn
Next checkpoint
Goal and limits set
0 / 7
Stored in this browser. Personal and practice work remain separate. “Complete” never means advice or permission to trade.