Although the CAPM is intuitively appealing in that it relates risk and return in a straightforward manner, the model's predictive value is often challenged because:
A)statistical tests have not been conclusive in validating the relationship between beta and return proposed by the CAPM.
B)the CAPM only addresses unsystematic risk, not market risk.
C)beta measures only the stock's coefficient of business-specific risk.
D)All of the above

Question

Quizplus · Accepted Answer

Although the CAPM is intuitively appealing, statistics have not been conclusive in validating the relationship between beta and return proposed by the model. The other options listed are not accurate; the CAPM addresses market risk, not unsystematic risk, and beta measures both systematic and business-specific risks.

Although the CAPM Is Intuitively Appealing in That It Relates