Bayesian CAPM Beta Estimation

Juan Gesino
Feb 8 · 7 min read

Continuing with my (mostly) healthy obsession with Bayesian statistics (see my previous article), in this article, I’ll use a linear regression model from a Bayesian perspective.

To demonstrate how linear regressions in the context of Bayesian statistics work, I will use the CAPM to estimate stock’s Betas.

Introduction

It’s not fundamentally important that you are familiar with CAPM to understand the example of regressions using Bayesian statistics. However, for those out there who might be interested, CAPM stands for…