The Discussion on the Problems in the CAPM Model

摘要

The capital asset pricing model,almost always referred to as the CAPM,is a center piece of model financial economics.But there are two major problems in this model.First,it is assumed directly that the market is equilibrium,avoiding to discuss how to adjust the disequilibrium market into an equilibrium one on the basis of the CAPM.Second,only the rate of return is considered,while the effect of the proportion of the assets is ignored,which is much likely to influence the understanding of the relationship between the risk and the return.The two problems are discussed in this paper through a numerical example and the conclusions are: the CAPM model is not the same before and after the market equilibrium occurs and the different asset proportions have a great impact on the result of pricing model of CAPM.The capital asset pricing model(CAPM),following logically from the Mean-Variance Portfolio Theory,is a center piece of model financial economics,which leads to a lot of empirical studies of the stock market.While as Rolle points out,the CAPM does not fully withstand empirical tests for the reason that the index market can not be proved to be the efficient market portfolio,consequently impossible to estimate the genuine coefficient of beta [1].In fact,except for the impossibility of test,the CAPM has not been completed in theory yet.We are to illustrate the theoretical problems of the model through a simplified example.Certainly we accept all the other assumptions of it,such that the investor is risk-free,there is no transaction costs etc.