CAPM adoption failed to improve the model’s fit to market data

Evidence

What is crucial from the viewpoint of Barnesian performativity is that the agreement between the Capital Asset Pricing Model and empirical data does not seem to have improved after the model was formulated. If anything, tests on later data suggested poorer agreement than the original tests, which were conducted using price series stretching back into the period before the Capital Asset Pricing Model was formulated. — Donald MacKenzie, An Engine, Not a Camera, 1147

Categorization

• XREF: connects to: Early CAPM tests found low-beta stocks overperformed and high-beta stocks underperformed predictions — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 392; The CAPM may be true but can never be empirically tested — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 404; CAPM shows no evidence of Barnesian performativity in pricing — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 1147 (+2 more)

Broader Connections

• Using a model can make markets conform less well to it. #expands (0.80) — Donald MacKenzie, An Engine, Not a Camera, 92
• Regulatory use of CAPM could generate model-compliant returns but remains untested empirically #qualifies (0.75) — Donald MacKenzie, An Engine, Not a Camera, 1150