The CAPM was embraced in Chicago but regarded skeptically at MIT

Evidence

As was noted above, Black had been a close colleague of the Capital Asset Pricing Model’s co-developer, Jack Treynor. Scholes had done his graduate work at the University of Chicago, where in the 1960s and the early 1970s the model was seen as an exemplary contribution to the field. (The “Chicago” criticism of the model discussed in chapter 4 was a later development.) However, at the other main site of financial economics, MIT, the original version of the Capital Asset Pricing Model was regarded much less positively. The model had been developed using a “mean-variance” view of portfolio selection: investors were modeled as guided only by the expected value or mean of the returns on investments, and by investments’ risks as measured by the expected standard deviation or variance of their returns. — Donald MacKenzie, An Engine, Not a Camera, 587

Categorization

• XREF: Reinforces a recurring theme across the reader’s sources: how institutional site and personal networks shape which models gain authority, paralleling the Champagne Fairs and diamond bourse as sites where knowledge and reputation were locally organized. — connects to: The Chicago and MIT finance groups were divided by methodology and by free-market politics — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 315; Early CAPM believers later turned against it through theoretical work — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 402; Black and Scholes doubted CAPM’s accuracy while building their model on it — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 1116

Broader Connections

• Early CAPM believers later turned against it through theoretical work #expands (0.85) — Donald MacKenzie, An Engine, Not a Camera, 402
• Black and Scholes doubted CAPM’s accuracy while building their model on it #exemplifies (0.80) — Donald MacKenzie, An Engine, Not a Camera, 1116