A Bad Habit of Accepting Theory as Fact - James Monitor on CAPM
A must read article about the weaknesses of CAPM.
The chart below plots the average return for each decile against its average beta. The straight line shows the predictions from the CAPM. The model’s predictions are clearly violated. CAPM woefully under predicts the returns to low beta stocks, and massively overestimates the returns to high beta stocks. Over the long run there has been essentially no relationship between beta and return.
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Posted: January 30th, 2007 under Equities, General.
Comments: 1
Comments
Comment from LCD Projector Rentals Guy
Time: April 18, 2007, 9:07 am
This is my first comment over here. I like this blog a lot.
I liked this blog entry the most though, the way you said it was just amazing!
See ya Later 
P.S. - CSS update?
LCD Projector Rentals Guy
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