Empirical Evidence on Security Returns and CAPM

This lecture offers a comprehensive overview of Capital Asset Pricing Model (CAPM) testing, beginning with its foundational elements and their connection to the Efficient Market Hypothesis. We explore the inherent challenges faced by Single-Factor CAPM, including issues with risk premiums, beta, and market portfolio observations. The lecture further delves into empirical testing hurdles, such as the two-pass statistical test and critiques by Roll. We then transition to multifactor and...