Abstract
The Sharpe–Lintner–Mossin (Sharpe 1964; Lintner 1965; Mossin 1966) Capital Asset Pricing Model (CAPM) plays a central role in modern finance theory. It is founded on the paradigm of homogeneous beliefs and a rational representative agent. However, froma theoretical perspective this paradigmhas been criticized on a number of grounds, in particular concerning its extreme assumptions about homogeneous beliefs, information about the economic environment, and the computational ability on the part of the rational representative economic agent.
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