7 What is of the following is wrong for the CAPM? ...
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What is of the following is wrong for the CAPM?
| CAPM makes sure that the following risk-reward ratio to be the same across stocks: E(R)/Cov(R,Rm), where R is the excess return of a stock and Rm is the excess return of the market. | ||
| Even if the risk of a stock is entirely due to firm specific risk, the stock is expected to earn the same return as a risk-free asset. | ||
| A non-zero alpha reflects that the security is efficiently priced in the CAPM world. | ||
| CAPM makes sure that the following risk-reward ratio to be the same across stocks: E(R)/Var(R), where R is the excess return of a stock. |
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