Review:testing CAPM CAPM does not hold exactly ▣The regression =a,+B,(m-r)+E often give nonzero alpha. CAPM requires alpha to be zero for all assets CAPM may fail if factors other than beta affect asset returns,such as O Fama-French factors:market(beta),size,and book-to- market 2010/Yichuan Liu f Review: testing CAPM  CAPM does not hold exactly exactly  The regression ri i  irm  rf   i often give nonzero alpha.  CAPM requires alpha to be zero for all assets  CAPM may f i al if f t ac ors other than b t e a affect asset returns, such as oFama‐French factors: factors: market (beta), (beta), size, and book‐to‐ market 2010 / Yichuan Liu 7