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Reports of Beta's Death Have Been Greatly Exaggerated

Author

Listed:
  • Kevin Grundy

    (Princeton University)

  • Burton G. 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.

Suggested Citation

  • Kevin Grundy & Burton G. Malkiel, 1995. "Reports of Beta's Death Have Been Greatly Exaggerated," Working Papers 133, Princeton University, Department of Economics, Center for Economic Policy Studies..
    • Handle: RePEc:pri:cepsud:27
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    File URL: https://gceps.princeton.edu/wp-content/uploads/2017/01/27malkiel.pdf
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    More about this item

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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