One reason why knowbetter wants to hold Apple in Smalval's portfolio is that Knowbetter is optimistic about iPhone X sales. Maggie asks if the Fama- French estimate of Apple's expected return is much higher than the CAPM estimate. Compute and compare the CAPM and FF3 estimates of Apple's expected return, using excess return data for Apple (not the hardware industry). Why is the FF3 estimate different? Comment on the magnitude of the difference. For what kinds of stocks would you expect to find the biggest differences between the CAPM and FF3 estimates?
