Finance School of management Assumptions of CAPM Assumption 1(homogeneous in information processing) Investors agree in their forecasts of expected rates of return, standard deviation, and correlations of the risky securities Assumption 2(homogeneous in behavior) Investors generally behave optimally according the theory of portfolio selection uesTc5 Finance School of Management Assumptions of CAPM u Assumption 1 (homogeneous in information processing) Investors agree in their forecasts of expected rates of return, standard deviation, and correlations of the risky securities u Assumption 2 (homogeneous in behavior) Investors generally behave optimally according the theory of portfolio selection