Findings by Basu that stocks with high P/E ratios tended to stocks with low P/E ratios challenge the efficacy of the CAPM.

Question

Quizplus · Accepted Answer

Basu's findings challenge the efficient market hypothesis by suggesting that stocks with low P/E ratios outperform those with high P/E ratios, but this does not directly challenge the Capital Asset Pricing Model (CAPM), which is a model used to determine a theoretically appropriate required rate of return of an asset, considering its risk relative to the market.

Findings by Basu That Stocks with High P/E Ratios Tended