The CAPM is about expected return. If you find a formula for expected returns that works well in the real markets, would you publish it? Before or after becoming a billionaire? The CAPM is an absurd 2 model because its assumptions and its predictions/conclusions have no basis in the real world. According to the dictionary, a theory is “an idea or set of ideas that is intended to explain facts or events”; and a model is “a set of ideas and numbers that describe the past, present, or future state of something”. With the vast amount of information and research that we have, it is quite clear that the CAPM does not “explain facts or events”, nor does it “describe the past, present, or future state of something”. The use of CAPM is also a source of litigation: many professors, lawyers... get nice fees because many professionals use CAPM instead of common sense to calculate the required return to equity. Users of the CAPM make many illogical errors valuing companies, accepting/rejecting investment projects, evaluating fund performance, pricing goods and services in regulated markets, calculating value creation... It is important to differentiate between a fact (something that truly exists or happens: something that has actual existence; a true piece of information) and an opinion (what someone thinks about a particular thing). We all should try to explain a portion of “the world as it is”, not of “the world as we model it”. Ricardo Yepes, professor of philosophy of my university, wrote: “Learning means being able to keep perceiving reality as it truly is: complex and not trying to fit every new experience into a closed and pre-conceived notion or overall scheme”. We may find out an investor’s expected return for IBM by asking him. However, it is impossible to determine the expected return for IBM of the market, because this parameter does not exist. Different investors have different cash flow expectations and different expected (and required) returns to equity. One could only talk of the expected return of the market if all investors had the same expectations. But investors do not have homogeneous expectations. Sections 11 and 12 show how to calculate required returns in a sensible way and how to use betas being a reasonable person (using common sense, experience and some finance knowledge). Valuation is about required return. There are persons, papers and books that mix (or assume that are equal) expected and required returns.