A Critical Assessment of The Capital Asset Pricing Model (CAPM)”
You are required to
- Describe the Capital Asset Pricing Model, including the assumptions underlying the theory
- Explain the relationship between the Security Market Line and the Capital Market Line, using diagrams and examples to illustrate your explanation
- Briefly set out arguments in favour of – and against - the theory, outline its uses and make a critique of its underlying assumptions
- Identify any alternatives which have been suggested in place of CAPM
- Conclude with an overall assessment of the theory and state any recommendations you may have from your study.
- Conclusion – a brief overall assessment of the CAPM theory.