Abstract

http://ssrn.com/abstract=411354
 
 

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The CAPM and Beta in an Imperfect Market


Ramon P. DeGennaro


University of Tennessee, Knoxville - Department of Finance

Sangphill Kim


University of Massachusetts Lowell - Department of Finance


Journal of Portfolio Management, Vol. 12, 1986

Abstract:     
The General Capital Asset Pricing Model (GCAPM) incorporates certain market imperfections. Levy concludes that in GCAPM equilibrium, all investors do not necessarily hold the market portfolio and that a security's own variance is priced. We show that financial intermediaries, responding to potential abnormal profits, relax an important GCAPM constraint. The introduction of intermediaries into the GCAPM leads to results not unlike those of the CAPM itself. If an asset's own variance affects its price, we conclude that this feature provides a major reason for the existence of financial intermediaries.

Keywords: Arbitrage, Market Efficiency Hypothesis, GCAPM, CAPM, intermediaries, market portfolio, systematic risk

JEL Classification: G1, G2, D5, E2, M5

Accepted Paper Series





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Date posted: June 18, 2003  

Suggested Citation

DeGennaro, Ramon P. and Kim, Sangphill, The CAPM and Beta in an Imperfect Market. Journal of Portfolio Management, Vol. 12, 1986. Available at SSRN: http://ssrn.com/abstract=411354

Contact Information

Ramon P. DeGennaro (Contact Author)
University of Tennessee, Knoxville - Department of Finance ( email )
423 Stokely Management Center
Knoxville, TN 37996
United States
865-974-1726 (Phone)
865-974-1716 (Fax)
Sangphill Kim
University of Massachusetts Lowell - Department of Finance ( email )
One University Avenue
Lowell, MA 01854
United States
(978) 934-2770 (Phone)
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