Ve start with a brief discussion of the CAPM and the three-factor model
(Scction 2). Section 3 explores variation through time in the CAPM and
three-factor risk loadings of industries. Sections 4 and 5 compare different ways
to estimate the loadings and the cost of equity. Section 6 examines uncertainty
about factor risk premiums. In Section 7 we present standard errors for CE
estimates that allow for uncertainty about both risk loadings and risk premiums.
Section 8 concludes.