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

  • Maximum weight of the low vol cohorts

    March 29, 2012

    Maximum weight was constrained to 4% at the start of 2007, how does that grow when unhindered? Previously “Low (and high) volatility strategy effects” created 6 sets of random [...]

  • Rebalancing the low vol cohorts

    March 28, 2012

    How much turnover is required to get portfolios back to their constraints? Previously “Low (and high) volatility strategy effects” created 6 sets of random portfolios as of 2007 and [...]

  • Beta is not volatility

    March 26, 2012

    The missing link between beta and volatility is correlation. Previously "4 and a half myths about beta in finance" attempted to dislodge several myths about beta, including that beta [...]