A critical look behind the facade of the Capital Asset Pricing Model (CAPM)

Though the Capital Asset Pricing Model and its epoch- making implications for the financial world are still held in very high esteem evidence of doubt is mounting steadily. In accord with the fundamental conditions assumed by the CAPM this paper will mainly investigate into the logical compatibility of some pivotal highlights, especially the use of asset- returns as inputs and not as results of the portfolio optimization, the assumption that receipts from a capital asset in t do neither depend on the volume of productive capacities financed by this type of assets nor on the asset-mixture, the inconsistent trust in equilibrium prices and the dubious one-period investment horizon. Finally, inconsistencies arising from the perspective of ivory-tower model instead of realistic conditions are discussed in less detail.