A criticism of the CAPM is that it:
A) ignores the return on the market portfolio.
B) ignores the risk-free return.
C) requires a single measure of systematic risk.
D) utilizes too many factors.
E) None of these.

Question

Quizplus · Accepted Answer

The CAPM assumes that there is only one measure of systematic risk, beta, which may not accurately reflect the risk of a security. Additionally, it assumes that all investors have access to the same information and can borrow and lend at the risk-free rate, which may not be true in reality. However, the CAPM does incorporate the return on the market portfolio and the risk-free rate in its calculation. It also does not utilize too many factors.

A Criticism of the CAPM Is That It