A look at the quality of CAPM

August 2, 2011

Empirical Finance Blog has a post called “How to use the Fama French Model”.

I find  the first part of the post most interesting.  This shows some examples of how the Capital Asset Pricing Model falls down.  I’ve trashed CAPM before in the form of “4 and a half myths about beta in finance”.

The posts on low volatility investing also exhibit weaknesses of CAPM.

Subscribe to the Portfolio Probe blog by Email

Latest posts

Leave a Reply

Related posts

  • 2 dimensions of portfolio diversity

    July 16, 2012

    Portfolio diversity is a balancing act. Previously The post "Portfolio diversity" talked about the role of the correlation between assets and the portfolio.  The current post fills a hole [...]

  • Alpha alignment

    July 9, 2012

    An explanation of alpha factor alignment in portfolio optimization, and a look at the spectrum of views on it. Venue FactSet recently hosted an event that included a panel [...]

  • A practical introduction to garch modeling

    July 6, 2012

    We look at volatility clustering, and some aspects of modeling it with a univariate GARCH(1,1) model. Volatility clustering Volatility clustering -- the phenomenon of there being periods of relative [...]