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The Capital Asset Pricing Model (CAPM) has been subject to intense scrutiny from academics and...

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Finance

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The Capital Asset Pricing Model (CAPM) has been subject to intense scrutiny from academics and practitioners. Please provide a detailed evaluation of the evidence by answering the below questions. 1. How would you test the CAPM empirically? You need to detail the testing procedure? (1 mark) 2. Explain why CAPM's ability to explain asset returns vary across high-low sentiment periods? (1.5 mark) 3. Explain why CAPM's ability to explain asset returns depends on the existence of risk-free rate? (1.5 marks) 4. Do multifactor models provide a solution to CAPM's failure? Why/Why not? (1 mark)

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