The Capital Asset Pricing Model
Assumptions, Evidence, and Alternatives

About this book:

Few models have defined modern finance like the Capital Asset Pricing Model—yet few are as widely misunderstood or blindly applied. This book strips away the textbook dogma to reveal the CAPM as a living intellectual history: a brilliant theoretical construct forged from Markowitz’s mean-variance revolution, stress-tested by the econometric rigor of Black, Jensen, Scholes, Fama, and MacBeth, and ultimately challenged by Roll’s devastating critique of the unobservable market portfolio. You will follow the math from the efficient frontier to the Security Market Line, but more importantly, you will see exactly where the assumptions crack under the weight of empirical reality.

Moving beyond derivation, the text confronts the persistent anomalies that forced the discipline to evolve. It guides you through the critical pivot from market-beta to consumption-beta in the CCAPM, dissects the zero-beta frontier when risk-free borrowing is a fantasy, and faces the enduring enigma of the equity premium puzzle. Each chapter bridges the gap between elegant proof and messy data, equipping you with the diagnostic tools to distinguish robust pricing kernels from spurious factor regressions.

Written for the quantitative practitioner and the serious student of financial economics, this is not a manual for plugging beta into a spreadsheet. It is a masterclass in the epistemology of asset pricing—teaching you how to read the literature critically, evaluate multi-factor successors on their theoretical merits, and navigate the nuanced interplay between risk, equilibrium, and the limits of diversification. If you want to understand *why* the CAPM works, *where* it fails, and *what* comes next, this is the definitive roadmap.