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Working paper

The lost capital asset pricing model

Abstract:

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, whi...

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Publication status:
Published

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Publisher copy:
10.2139/ssrn.2922598

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Institution:
University of Oxford
Division:
SSD
Department:
Saïd Business School
Oxford college:
Oriel College
Role:
Author
Publisher:
Social Science Research Network
Host title:
SSRN Electronic Journal
Publication date:
2021-12-02
DOI:
EISSN:
1556-5068
Language:
English
Keywords:
Pubs id:
1004432
Local pid:
pubs:1004432
Deposit date:
2022-11-11

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