According to Roll, the only testable hypothesis associated with the CAPM is
A) the number of ex-post mean-variance efficient portfolios.
B) the exact composition of the market portfolio.
C) whether the market portfolio is mean-variance efficient.
D) the SML relationship.
E) None of the options are correct.

Question

Quizplus · Accepted Answer

According to Roll's critique, the only testable hypothesis associated with the Capital Asset Pricing Model (CAPM) is whether the market portfolio is mean-variance efficient. This is because the CAPM assumes that the market portfolio is efficient, but in reality, identifying the true market portfolio is challenging, making it difficult to test other aspects of the CAPM directly.

According to Roll, the Only Testable Hypothesis Associated with the CAPM