This textbook is available Logo
Fundamentals of Financial Management 15th Edition

Fundamentals of Financial Management (15th Edition)

Book Edition15th Edition
PublisherCengage Learning
Section 8-5: Some Concerns about Beta and the CAPM
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.


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. 

How would you rate this answer and explanation?
Did you like this example?
Subscribe for full access
Page 303