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M. Blume, I. Friend (1973)
A NEW LOOK AT THE CAPITAL ASSET PRICING MODELJournal of Finance, 28
F. Black (1972)
Capital Market Equilibrium with Restricted BorrowingThe Journal of Business, 45
J. Lintner (1965)
THE VALUATION OF RISK ASSETS AND THE SELECTION OF RISKY INVESTMENTS IN STOCK PORTFOLIOS AND CAPITAL BUDGETSThe Review of Economics and Statistics, 47
W. Sharpe (1964)
CAPITAL ASSET PRICES: A THEORY OF MARKET EQUILIBRIUM UNDER CONDITIONS OF RISK*Journal of Finance, 19
S. Ross (1976)
The arbitrage theory of capital asset pricingJournal of Economic Theory, 13
MARCH 1977 THE CAPITAL ASSET PRICING MODEL (CAPM), SHORT-SALE RESTRICTIONS AND RELATED ISSUES STEPHEN ROSS* A. I. INTRODUCTION THE MEAN VARIANCE CAPITAL asset pricing model (CAPM) developed by Sharpe [5] and Lintner [3] has become a focal point for finance. Under conditions of perfection in competitive markets and assumptions that permit us to consider only the means and variances of returns, the CAPM provides an intuitively appealing and empirically testable hypothesis on asset returns. In deriving the CAPM Sharpe [5] and Lintner [3] assumed that there was a riskless asset in the investment opportunity set, and the first significant extension of their work was by Black [l] who showed that the assumption of a riskless asset could be dispensed with. Black's result naturally raised a number of conjectures concerning what occurs with alternative realistic weakenings of the underlying assumptions. For example, do the conclusions of the CAPM still hold if short sales are restricted or if borrowing is penalized on some assets but not on others? This paper has two objectives. First, a very simple and straightforward approach to the CAPM will be taken. Essentially we will show that all .of the familiar results follow directly from the
The Journal of Finance – Wiley
Published: Mar 1, 1977
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