RT Journal Article
SR Electronic
T1 CAPM Investors Do Not Get Paid for Bearing Risk
JF The Journal of Portfolio Management
FD Institutional Investor Journals
SP 91
OP 94
DO 10.3905/jpm.2008.701620
VO 34
IS 2
A1 Harry M. Markowitz
YR 2008
UL https://pm-research.com/content/34/2/91.abstract
AB The relation between the excess return of each security and its beta, where beta is defined as its regression against the return on the market portfolio, is linear in the Sharpe-Lintner capital asset pricing model. This linear relation is often interpreted to mean that CAPM investors are paid for bearing systematic risk. In fact, this is not a correct interpretation, because two securities may have different excess returns even though they have identical risk structures in terms of their covariances with other securities in the market. If the parameters of the CAPM are generated in a natural way, securities with the same risk structure almost surely will have different expected returns.TOPICS: Factor-based models, statistical methods, portfolio management/multi-asset allocation