Which two of the following highlight technical problems with the CAPM?
A) The market portfolio is unobservable.
B) It is a one- period model estimated at one point in time.
C) It can be used to assess levels of risk.

Question

Quizplus · Accepted Answer

A technical problem with the CAPM is that the market portfolio is unobservable. While the model assumes that all investors hold a diversified portfolio that includes all assets in the market, in reality, there is no single market portfolio that is observable. This makes it difficult to test and apply the model. 
Another technical problem is that the CAPM is a one-period model estimated at one point in time. This means that the model assumes that investors only care about returns and risks over a single period, which may not reflect real-world behavior. Additionally, the model relies on historical data to estimate parameters, which may not be reliable in predicting future returns and risks.

Which Two of the Following Highlight Technical Problems with the CAPM