Andrei, Daniel; Cujean, Julien; Wilson, Mungo (2022). The Lost Capital Asset Pricing Model (In Press). Review of Economic Studies Oxford University Press
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We provide a novel explanation for the empirical failure of the CAPM despite its
widespread practical use. In a rational-expectations economy in which information is
dispersed, variation in expected returns over time and across investors creates an informational gap between investors and the empiricist. The CAPM holds for investors,
but the Securities Market Line appears flat to the empiricist. Variation in expected
returns across investors accounts for the larger part of this distortion, which is empirically substantial; it offers a new interpretation of why “Betting Against Beta” works:
BAB really bets on true beta. The empiricist retrieves a stronger CAPM on days when
public information reduces disagreement among investors.
Item Type: |
Journal Article (Original Article) |
|---|---|
Division/Institute: |
03 Faculty of Business, Economics and Social Sciences > Department of Business Management > Institute of Financial Management |
UniBE Contributor: |
Cujean, Julien |
Subjects: |
600 Technology > 650 Management & public relations |
ISSN: |
0034-6527 |
Publisher: |
Oxford University Press |
Language: |
English |
Submitter: |
Karin Dolder |
Date Deposited: |
10 Nov 2022 13:19 |
Last Modified: |
05 Dec 2022 16:27 |
BORIS DOI: |
10.48350/174641 |
URI: |
https://boris.unibe.ch/id/eprint/174641 |
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