0
What are the deficiencies of CAPM as an explanation of the relationship between risk and expected return?
Wiki User
∙ 11y ago
CAPM IN THE EXACT FORM IS
Ri = Rf +
Wiki User
∙ 11y ago
One major deficiency of CAPM is that it assumes a linear relationship between risk and expected return, implying that assets with higher risk will always yield higher returns. However, in reality, this relationship may not hold true as investors may require additional compensation for taking on higher risk. Additionally, CAPM relies on the use of a single factor, the market risk premium, to explain all variations in expected returns, which may not adequately capture the complexity of real-world market conditions. Lastly, CAPM assumes that all investors have the same expectations and agree on the same inputs, which may not reflect the diverse range of beliefs and opinions in the market.
Add your answer:
Earn +20 pts
What is the explanation for the relationship between mass and gravity?
i have no clue
What is the explanation for the relationship between production and consumption?
between consumption production
What is an explanation for the relationship between age and physical activity?
HORMONES!
What is the relationship between observation and explanation?
You must observe to explain.
What is an explanation of the data that tells what relationship exists between the variable and the investigation called?
The explanation of data is called a theory.
What is the scientific explanation of thunder and ligthning earthquake?
There is no relationship between thunder and lightning and earthquakes.
What does an auditor do if there is a material difference between an expected and actual balance?
However, if there is a material difference between the expected and actual balance, the auditor will investigate this difference further. At this point the auditor will develop an explanation for the difference.
Is it true that the relationship between drug and alcohol use and crime is complex and lacks a cohesive explanation?
Yes, the relationship between drug and alcohol use and crime is complex, and thus the problem lacks a cohesive explanation. There are many factors involved, but no one factor completely explains the relationship between drug/alcohol use and crime.
What is the relationship between air and balloons?
This relationship between the temperature and volume of a gas, which became known as Charles' law, provides an explanation of how hot-air balloons work
What is the relationship between hypotheses and predictions?
A prediction is a reasonable guess or explanation. A hypothesis is theory; a reasonable idea.
Groups of scientific Statements about the cell and the relationship between organisms and cells?
Groups of scientific statements about the cell and the relationship between organisms and cells is call an hypothesis. An hypothesis is a proposed explanation for a phenomenon which is testable.
What is the difference between an explanation and an observation?
difference between an observaton and explanation
