One key conclusion of the Capital Asset Pricing Model is that the value an asset should be measured by considering both the risk and the expected return of the asset assuming that the asset is held in a well-diversified portfolio. The risk of the asset held in isolation is not relevant under the CAPM.

Question

Quizplus · Accepted Answer

The CAPM assumes that investors hold diversified portfolios to manage risk, and therefore only considers the asset's contribution to the risk and return of the portfolio rather than its standalone risk level.

One Key Conclusion of the Capital Asset Pricing Model Is