Which of the following statements is false?
A) The CAPM remains the predominant model use in practice to determine the equity cost of capital.
B) Low beta stocks have tended to perform somewhat better than the CAPM predicts.
C) The empirically estimated security market line is somewhat steeper than that predicted by the CAPM.
D) Some evidence suggests that the market risk premium has declined over time.

Question

Quizplus · Accepted Answer

The empirically estimated security market line is actually flatter than predicted by the CAPM. This is known as the "low beta anomaly" and suggests that low beta stocks have a higher return than predicted by the CAPM.

Which of the Following Statements Is False