Title

Reports of Beta's Death Have Been Greatly Exaggerated

Author(s)

Kevin Grundy Kevin Grundy (Princeton University)

Burton G. Malkiel Burton Malkiel (Princeton University)

Abstract

For decades the Capital Asset Pricing Model (CAPM) has been held as an article of faith among financial economists. The model, usually attributed to 1990 Nobel Laureate William Sharpe (1964), was also developed by Fischer Black (1972), John Lintner (1965), Jan Mossin (1966), and Jack Treyor (1965). CAPM attempted to quantify the relationship between risk and return. Both economists and financial practitioners have long believed that riskier assets must yield a higher expected rate of return to induce investors to hold them. The innovation of CAPM was to specify the particular risk measure that would be priced in the market.

Creation Date

1995-09

Section URL ID

CEPS

Paper Number

27

URL

https://gceps.princeton.edu/wp-content/uploads/2017/01/27malkiel.pdf

File Function

Jel

G11, G12

Keyword(s)

Suppress

false

Series

3