A criticism of the CAPM is that it:
A)ignores the rate of return on the market portfolio.
B)ignores the risk-free rate.
C)requires a single measure of systematic risk.
D)utilizes too many factors.
E)contradicts the single-factor APT model.

Question

Quizplus · Accepted Answer

The CAPM assumes that there is only one measure of systematic risk, which is represented by beta. However, there are many other factors that can affect returns, such as size, value, and momentum. Therefore, the CAPM may not fully capture the complexities of the market and may not accurately price assets.

A Criticism of the CAPM Is That It