# Capital Asset Pricing Model, Part Three – Other Assumptions

In Parts One and Two of our examination of the **Capital Asset Pricing Model (CAPM)**, we evaluated two major assumptions:

1) Market returns are properly modeled by a **normal distribution**

2) **Beta (systematic risk)** is the sole source of priced risk for an asset or portfolio of asset

As you recall, we found several weaknesses in both assumptions as they may apply to hedge funds. This time, we’ll examine the remaining assumptions underlying CAPM, and see if each is reasonable when applied to hedge fund trading.

CAPM assumes: Continue reading “Capital Asset Pricing Model, Part Three – Other Assumptions” »

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