Tests of CAPM have confirmed that Capital Asset Pricing Model holds good under all circumstances.

Question

Quizplus · Accepted Answer

Tests of CAPM have shown that it does not hold true under all circumstances. Empirical studies have found that it has limitations in explaining stock returns in certain market conditions, such as during periods of market stress or during extreme events. Furthermore, other asset pricing models, such as the Fama-French three factor model, have been developed to better explain returns in the stock market.

Tests of CAPM Have Confirmed That Capital Asset Pricing Model