A note on a mean-lower partial moment CAPM without risk-free asset

Abstract

The standard capital asset pricing model (CAPM) is invalid if the risk-free asset ceases to exist or if the risk-free lending and borrowing rates are different. In the mean–variance (MV) framework, we have an alternative model known as zero-beta CAPM. However, in the case of mean-lower partial moment (MLPM) framework, there is no such alternative. This article addresses this issue and develops an equivalent MLPM model, which is valid for situations described above. The MV zero-beta CAPM can be seen as a special case of this model.