Hi all, this may be a rather simple question but I’d appreciate if anyone had the answer… Does the beta of a stock on the CAC40, for example, include as the expected return on the market part; the expected return of the CAC40 or the expected return on (the market portfolio of) all stocks in the world?
It depends what you are comparing the stock to, but it would likely be on the CAC40. If you model the covariance of returns on the world market, there are a ton of other variables (inflation, political risk, etc) that would make returns across markets difficult to compare. If you get through quant and equity, this will likely make sense to you.