The Capital Asset Pricing Model (CAPM): The History of a Failed Revolutionary Idea in Finance?

29 Pages Posted: 3 May 2013

Date Written: May 3, 2013

Abstract

The capital asset pricing model (CAPM) states that assets are priced commensurate with a trade-off between undiversifiable risk and expectations of return. The model underpins the status of academic finance, as well as the belief that asset pricing is an appropriate subject for economic study. Notwithstanding, our findings imply that in adhering to the CAPM, we are choosing to encounter the market on our own terms of rationality, rather than the market’s.

Keywords: Finance models, CAPM, Fama and French three-factor model

JEL Classification: G11, G12, G15

Suggested Citation

Dempsey, Michael J., The Capital Asset Pricing Model (CAPM): The History of a Failed Revolutionary Idea in Finance? (May 3, 2013). Available at SSRN: https://ssrn.com/abstract=2260197 or http://dx.doi.org/10.2139/ssrn.2260197

Michael J. Dempsey (Contact Author)

Ton Duc Thang University (TDTU) ( email )

District 7
Ho Chi Minh City, 3001
Vietnam

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