The Capital Asset Pricing Model (CAPM): The History of a Failed Revolutionary Idea in Finance?
Article first published online: 3 DEC 2012
© 2012 The Author. Abacus © 2012 Accounting Foundation, The University of Sydney
Special Issue: The Capital Asset Pricing Model
Volume 49, Issue Supplement S1, pages 7–23, January 2013
How to Cite
Dempsey, M. (2013), The Capital Asset Pricing Model (CAPM): The History of a Failed Revolutionary Idea in Finance?. Abacus, 49: 7–23. doi: 10.1111/j.1467-6281.2012.00379.x
- Issue published online: 27 DEC 2012
- Article first published online: 3 DEC 2012
- Fama and French three-factor model;
- Finance models
The capital asset pricing model (CAPM) states that assets are priced commensurate with a trade-off between undiversifiable risk and expectations of return. The model underpins the status of academic finance, as well as the belief that asset pricing is an appropriate subject for economic study. Notwithstanding, our findings imply that in adhering to the CAPM we are choosing to encounter the market on our own terms of rationality, rather than the market's.