EmpiricalTestsoftheCapitalAssetPricingModel(Chapter9).pptVIP

Empirical Tests of theCapital Asset Pricing Model(Chapter 9) Traditional Tests of the CAPM Black, Jensen, and Scholes Study Fama and MacBeth Study Roll’s Critique of Tests of the CAPM Additional Evidence Traditional Tests of the CAPM The CAPM predicts that all investors hold portfolios that are efficient in expected return, standard deviation space. Therefore, the Market Portfolio is efficient. To test the CAPM, we must test the prediction that the Market Portfolio is positioned on the efficient set. Initial testing of the CAPM did not test directly the prediction, “The Market Portfolio is