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The CAPM: Theoretical Validity, Empirical Intractability and Practical Applications

Journal Article


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Abstract


  • The capital asset pricing model (CAPM) is an ex ante concept, whereas so-called

    ‘tests’ of the CAPM are conducted ex post.The CAPM is a partial equilibrium model

    in which agents view the risk-free return (Rf) and the probability distribution of the

    future return on risky assets (Rj) as exogenous. Dempsey (2013) argues that the

    empirical evidence against the CAPM is so compelling that it has reached the point

    where the CAPM should be abandoned, possibly being replaced by an assumption

    that investors expect the same return on all assets, regardless of their relative risk.

Publication Date


  • 2013

Citation


  • Brown, P. & Walter, T. (2013). The CAPM: Theoretical Validity, Empirical Intractability and Practical Applications. Abacus: a journal of accounting, finance and business studies, 49 (SUPPL.1), 44-50.

Scopus Eid


  • 2-s2.0-84871822364

Ro Full-text Url


  • http://ro.uow.edu.au/cgi/viewcontent.cgi?article=2194&context=buspapers

Ro Metadata Url


  • http://ro.uow.edu.au/buspapers/1187

Has Global Citation Frequency


Number Of Pages


  • 6

Start Page


  • 44

End Page


  • 50

Volume


  • 49

Issue


  • SUPPL.1

Place Of Publication


  • Australia

Abstract


  • The capital asset pricing model (CAPM) is an ex ante concept, whereas so-called

    ‘tests’ of the CAPM are conducted ex post.The CAPM is a partial equilibrium model

    in which agents view the risk-free return (Rf) and the probability distribution of the

    future return on risky assets (Rj) as exogenous. Dempsey (2013) argues that the

    empirical evidence against the CAPM is so compelling that it has reached the point

    where the CAPM should be abandoned, possibly being replaced by an assumption

    that investors expect the same return on all assets, regardless of their relative risk.

Publication Date


  • 2013

Citation


  • Brown, P. & Walter, T. (2013). The CAPM: Theoretical Validity, Empirical Intractability and Practical Applications. Abacus: a journal of accounting, finance and business studies, 49 (SUPPL.1), 44-50.

Scopus Eid


  • 2-s2.0-84871822364

Ro Full-text Url


  • http://ro.uow.edu.au/cgi/viewcontent.cgi?article=2194&context=buspapers

Ro Metadata Url


  • http://ro.uow.edu.au/buspapers/1187

Has Global Citation Frequency


Number Of Pages


  • 6

Start Page


  • 44

End Page


  • 50

Volume


  • 49

Issue


  • SUPPL.1

Place Of Publication


  • Australia