The Investment CAPM
Fisher College of Business Working Paper No. 2015-03-19
Charles A. Dice Center Working Paper No. 2015-19
129 Pages Posted: 6 Dec 2015 Last revised: 7 Dec 2015
There are 3 versions of this paper
The Investment CAPM
The Investment CAPM
The Investment CAPM
Date Written: December 4, 2015
Abstract
A new class of Capital Asset Pricing Models arises from the first principle of real investment for individual firms. Conceptually as “causal” as the consumption CAPM, yet empirically more tractable, the investment CAPM emerges as a leading asset pricing paradigm. Firms do a good job in aligning investment policies with costs of capital, and this alignment drives many empirical patterns that are anomalous in the consumption CAPM. Most important, integrating the anomalies literature in finance and accounting with neoclassical economics, the investment CAPM succeeds in mounting an efficient markets counterrevolution to behavioral finance in the past 15 years.
Keywords: The investment CAPM, Factors War, anomalies, efficient markets, behavioral finance, the consumption CAPM, the joint-hypothesis problem
JEL Classification: G12, G14
Suggested Citation: Suggested Citation