Question: CAPM is a valuable tool that often comes under fire for all the estimates it relies upon. What are the key estimates used in CAPM?

CAPM is a valuable tool that often comes under fire for all the estimates it relies upon.

What are the key estimates used in CAPM? Why is this measure so harshly criticized? Do you agree with the critics? Why or why not?

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The Capital Asset Pricing Model CAPM is a widely used method for estimating the expected return on an investment particularly in the stock market The key estimates used in CAPM include the riskfree rate the expected market return and the beta of the investment in question The riskfree rate is typically estimated as the yield on a government bond or other lowrisk asset The expected market return is usually estimated using historical data such as the average return on a ... View full answer

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