Why is CAPM not CRAP

Posted: 19 Jan 2015

Date Written: January 17, 2015


James Montier (1990) rechristened CAPM as CRAP (Completely Redundant Asset Pricing) in a research paper. No doubt behavioral experts had insights into the market behavior, but somewhere there is an “Academic Bias” that creeps in, making academicians be more positively biased about their body of work. Montier makes his case against CAPM assumptions by illustrating the low beta and high beta portfolio behavior. Is everything wrong with CAPM? Is it really redundant?

Keywords: CAPM, Fama and French, Divergence, Market Idealization

JEL Classification: G10

Suggested Citation

Pal, Mukul, Why is CAPM not CRAP (January 17, 2015). Available at SSRN: https://ssrn.com/abstract=2551152

Mukul Pal (Contact Author)

AlphaBlock ( email )

Toronto, Ontario M8Z 2H6

HOME PAGE: http://www.alphablock.org

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