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an be regarded as the average reward rate of the whole market. If the risk that a certain investment bears is of the same degree to the average risk of the market, the reward rate of that investment is the same as the average reward rate of the whole market.

(3) Index β—the system risk index of the investment combinations—is the ratio of the risk degree of some investment combination to the risk degree of the combinations of market securities. The model of CAPM demonstrates the relationship between the benefit rate in expectation of some single combination of securities investment and the comparative risk degree. That is to say, the reward in expectation of any asset is surely equivalent to the risk-free interest rate plus an adjustment of the risk. If the later one shapes a high risk to the combination of the whole market, the extra compensation which is needed will be high. This is the chief result of CAPM.

Literature review 
However, the difficulty to use the statistic data to check the theory of CAPM lies in such aspect that the form of the model of CAPM is non-linear. To apply the classic linear regression model to the estimation of CAPM in the boundary of metrological Economics needs linearization of the model. More specifically, such kind of transformation of the model is needed: 
(1)
Here we have a linear model which could be estimated according to the form as following:
(2)
The form of the model means that the explaining variable x is and the constant a, and the explained variable y becomes . If the parameter b could be estimated to 1, then the CAPM could be proved to be true from the angel of empirical test, or else the CAPM could not be proved to true if b is obviously different with 1. In order to make the model above could be distinguished with the following model, (2) is called model 1 in this paper. 

Discussion of the data 
The data we choose for the empirical analysis for CAPM comes from the Standard Pool 500 index. As for the return of the company, we choose the ROE of five hundred companies which are included in the Standard Pool 500. The benchmark interest is the Federal Reserve basic interest, and the market portfolio rate of return is just the Standard Pool index. In the time period from the year of 2006 to 2007, the average level of Federal Reserve basic interest and market portfolio rate of return are 5.25% and 11.90% respectively. Of course, we have acquired the Beta indexes for the companies, which represent the relationships between the rate of return of companies and the market portfolio rate of return. All the data used in the test will be exhibited in the Appendix at the end of the paper. 

Presentation and interpretation of the empirical test results
1. The analysis without controlling variables
The regression method we use here is the OLS, The software used in our analysis is SPSS 16.0, which could also be used in econometric test though it has powerful functions in statistic application. we test the regression result with the statistic variable of R2 (the correlation parameter), T-test( for the significance of single variable) and F-test(for the significance of whole model) . The regression process will be divided into two parts, the first part is to carry out the simple linear regression which uses the model 1本论文由英语论文网提供整理，提供论文代写，英语论文代写，代写论文，代写英语论文，代写留学生论文，代写英文论文，留学生论文代写相关核心关键词搜索。