Select the true statement regarding the results of CAPM tests.
A) The SML appears not to be linear.
B) The intercept term is a generally found to be higher than the risk-free rate.
C) The slope of the CAPM is steeper than posited by the theory.
D) Investors are rewarded for assuming systematic and unsystematic risk.

Question

Quizplus · Accepted Answer

The intercept term in CAPM tests is often found to be higher than the risk-free rate, which contradicts the theory's assumption that the intercept should equal the risk-free rate. This anomaly is part of the evidence challenging the CAPM's empirical validity.

Select the True Statement Regarding the Results of CAPM Tests