June 25th, 2020 
Do you think the CAPM (Capital Asset Pricing Model) is universally applicable, i.e., is it successful in
determining the expected rate of return for stocks in all global economies? Is there a problem with estimating the
Beta (market risk) from historical returns? Apple, the example given in the text, is not the same company it was
20 years ago. Betas are not constant. For example, in the 1950s, the beta for IBM was 0.49, and today it is well
over 1. Discuss the reasons for the increase in risk and if required provide a numerical example.
Posted in 