Capital Asset Pricing Model
CAPM says expected excess return is beta times the market risk premium — one factor, one line, many violations.
Definition
Capital Asset Pricing Model refers to one factor, one line, many violations. Keep that definition fixed when comparing series, managers, or regimes — renaming the same tape does not create a new signal.
Why it matters
It shows up in factor research, attribution, and capacity debates — whether a return slice is skill, style, or fee drag. When one factor, one line, many violations shifts, related hedges, limits, and narratives usually need an explicit update rather than a quiet assumption.
Case
Suppose a desk is positioned for the opposite of what capital asset pricing model is saying. If one factor, one line, many violations moves against that book, the first question is not “is the story clever?” but whether size, hedges, and stop logic still match the observation.
How to read it
Check definition stability across universes, costs, and regimes before treating a backtest as portable. Prefer a short written null hypothesis for Capital Asset Pricing Model: what would falsify the current reading in the next window?