#capm
The assumptions of the CAPM include:
- All investors are Markowitz efficient investors who want to target points on the efficient frontier where their utility maps are tangent to the line. The exact location on the efficient frontier and, therefore, the specific portfolio selected, will depend on the individual investor's risk-return utility function.
- All investors have the same one-period time horizon (e.g., one year).
- All investors have homogeneous expectations: that is, they estimate identical probability distributions for future rates of return.
- All investments are infinitely divisible, which means that it is possible to buy or sell fractional shares of any asset or portfolio.
- All investors are price takers. Their trades cannot affect security prices.
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