This article describes the academic debate about the usefulness of the capital asset pricing model (the CAPM) developed by Sharpe and Lintner. First the article describes the data the model is meant to explain—the historical average returns for various types of assets over long time periods. Then the article develops a version of the CAPM and describes how it measures the risk of investing in p...

This note contains two remarks on the traditional capital asset pricing model (CAPM) with one risk-free asset. Firstly, an elementary proof of the two-fund separation theorem is provided showing that asset-demand may become undefined if the limiting slope of the investor's indifference curves is finite. Secondly, it is shown that an additional limiting condition on the risk aversion is generall...

One of the bedrocks of modern capital market theory is that market risk and related statistics are stable over the long run. Nobel prizes have been won for this insight, and it is taught in the best business schools. Regulations have also been written based upon this assumption. Yet, experience does not support this idea. We know that often markets have periods of relative stability, but they c...

The purpose of this study is to test the validity CAPM in Amman Stock Exchange (ASE) during period (2010 – 2014), which was divided into three sub periods. We used monthly returns 60 stocks Jordanian companies listed ASE. Black, Jensen and Scholes (1972) Fama MacBeth (1973) methods were different sub-periods. analysis results showed that higher risk (beta) not associated with levels return, vio...

In Brennan and Lo (2010), a mean-variance efficient frontier is defined as “impossible” if every portfolio on that frontier has negative weights, which is incompatible with the Capital Asset Pricing Model (CAPM) requirement that the market portfolio is mean-variance efficient. We prove that as the number of assets n grows, the probability that a randomly chosen frontier is impossible tends to o...

capital asset pricing, as one of the basic theories in finance and investment area, develop a model for estimation of expected rate of return and equity cost of capital. this model has many applications in the field of finance. one of anomalies in the capital asset pricing model is the value premium that its proponents believe this risk premium is compensation for a risk not mentioned in origin...

The capital asset pricing model (CAPM) is often based on the Gaussianity or normality assumption. However, such an assumption frequently violated in practical situations. In this paper, we introduce symmetric CAPM considering distributions with lighter heavier tails than normal distribution. These are and belong to family of elliptical distributions. We pay special attention members related nor...

capital assets pricing model is used as a tool for the estimation of investments in capital markets with the relation of expected return and risk on securities. this study examines the applicability of capm on pakistan stock markets and karachi stock exchange being the main capital market of pakistan is taken for the study. the analysis is done by taking a sample of 10 performing companies of 1...

We argue that the empirical evidence against the capital asset pricing model (CAPM) based on stock returns does not invalidate its use for estimating the cost of capital for projects in making capital budgeting decisions. Because stocks are backed not only by projects in place, but also by the options to modify current projects and undertake new ones, the expected returns on stocks need not sat...

We study the impact of delegated portfolio management on asset pricing in a large-scale experimental setting. As predicted by standard models, in early rounds of our experiments delegation has no impact on pricing; we replicate CAPM pricing as in earlier experiments without delegation. However, CAPM pricing fails in later rounds. We attribute this to the fund flows: investors tend to increase a...