The research by Fama and French suggesting that CAPM is invalid has generated which of the following responses?
A)Better econometrics should be used in the test procedure.
B)Estimates of asset betas need to be improved.
C)Theoretical sources and implications of research that contradicts CAPM needs to be reconsidered.
D)The single-index model needs to account for non-traded assets and the cyclical behavior of asset betas.
E)All of the above

Question

Quizplus · Accepted Answer

All of the responses listed are valid and have been suggested by various researchers and practitioners in response to the Fama and French research. Better econometrics and estimates of betas can help improve the accuracy of asset pricing models, while theoretical sources and implications should be reconsidered to better understand why CAPM may not hold in certain situations. Additionally, the single-index model may need to be expanded to account for non-traded assets and fluctuations in asset betas over time.

The Research by Fama and French Suggesting That CAPM Is