Journal of Finance Vol. 51 No. 5 1996
The CAPM is Wanted, Dead or Alive
Abstract
Kothari, Shanken, and Sloan (1995) claim that βs from annual returns produce a stronger positive relation between β and average return than βs from monthly returns. They also contend that the relation between average return and book-to-market equity (BE/ME) is seriously exaggerated by survivor bias. We argue that survivor bias does not explain the relation between BE/ME and average return. We also show that annual and monthly βs produce the same inferences about the β premium. Our main point on the β premium is, however, more basic. It cannot save the Capital asset pricing model (CAPM), given the evidence that β alone cannot explain expected return.
- DOI
- 10.2307/2329545
- Volume
- 51
- Issue
- 5
- Pages
- 1947
- Sources
- openalex crossref