Abstract
Recently tests of the CAPM are on the alternative proxies for the expected return as researchers believe that average realized return is an extremely poor proxy for the expected return. Like other researchers, we also believe on the failure of average realized return as an estimate for expected return. Unlike others, we believe that the inability of average realized return to explain risk-return relationship has led to this controversy. Besides, the differences in the information sets hinder realized return to be the ex-post realization of the ex-ante expectations. We argue that considering realized return as a sample of returns is misleading as we explain the differences between ex-post value and the realized return. If pricing is rational, we can show the validity of CAPM even when empirical tests deny CAPM.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
