In the main example, we assumed there was no risk-free rate, which is a reasonable assumption to make nowadays. However, there might be cases when we would like to account for a non-zero risk-free rate. In this section, we present three possible approaches:
- Using data from prof. Kenneth French's website: The market premium (rm- rf) and the risk-free rate (approximated by the one-month Treasury bill) can be downloaded from Prof. Kenneth French's website (please refer to the See also section of this recipe for the link). Please bear in mind that the definition of the market benchmark used by prof. French is different than the S&P 500 index – a detailed description is available on his website. For a description of how to easily ...