What are two potential tests that can he conducted to verify the CAPM?
QUESTION
What are two potential tests that can he conducted to verify the CAPM? What are the results of such tests? What is Rolls critique of CAPM rests?
elation exists between the required rates of return and market risk but there is no proof as to irrelevance of diversifiable risk. Roll criticized the CAPM tests saying that the linear relationship emerged because of the mathematical properties of the models used in testing. Roll did not criticize the theory but said that it is impossible to prove it.
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