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Based on the learnings from your project, what are the limitations of Capital asset pricing model (CAPM) when used to pick stocks?

Microeconomics: Principles & Policy

14th Edition

ISBN:9781337794992

Author:William J. Baumol, Alan S. Blinder, John L. Solow

Publisher:William J. Baumol, Alan S. Blinder, John L. Solow

Chapter9: The Financial Markets And The Economy: The Tail That Wags The Dog

Section: Chapter Questions

Problem 1DQ

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Based on the learnings from your project, what are the limitations of Capital asset pricing model (CAPM) when used to pick stocks?

Definition Definition Model that illustrates the correlation between the expected return and risk of capital investment in stock. According to this model, the expected rate of return on equity is equal to the risk-free return added to a risk premium, which is based on the stock beta.

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