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Fundamentals of Financial Management 15th Edition

Fundamentals of Financial Management (15th Edition)

Book Edition15th Edition
Author(s)Brigham
ISBN9781337395250
PublisherCengage Learning
SubjectFinance
Section 8-5: Some Concerns about Beta and the CAPM
SelfTest
End of Chapter
Self-Test Questions and Problems
Questions
Problems
Comprehensive/Spreadsheet Problem
Integrated Case
Taking a Closer Look
Discussion Questions
Chapter 8, Section 8-5, SelfTest, Exercise 08
Page 303

Have there been any studies that question the validity of the CAPM? Explain.

Here is a tip:

CAPM's only factor for determining the required returns of individual stocks is beta.

Explanation

Eugene Fama and Kenneth French found that returns are dependent not only on beta, but on factors such as firm size and book-to-market ratio. 

Verified Answer

Yes, there have been studies that question the validity of CAPM such as multivariable models and studies by Eugene Fama of University of Chicago and Kenneth French of Dartmouth. 

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Page 303

Related Exercises

Have there been any studies that question the validity of the CAPM? Explain.
Fundamentals of Financial Management, Concise Edition
Are there any reasons to question the validity of the CAPM? Explain.
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