1. Sharpe Ratio = (R-Rf)/ơSo it means every unit risk can provide different risk premium.Then here the question is: where is the alpha (arbitrage opportunity)? [R=Rf+R(risk premium)+R(liquidity)+alpha]
2. As we know Total Risk = Systematic Risk + Diversifiable Risks.Is the CAPM [R - R𝑓 = ℬ (Rm - R𝑓) + α] the method to measure Total Risk?
3. By definition, CAPM can only work in inefficient markets, because it only collects the historical data from the market. Right?
2. As we know Total Risk = Systematic Risk + Diversifiable Risks.Is the CAPM [R - R𝑓 = ℬ (Rm - R𝑓) + α] the method to measure Total Risk?
3. By definition, CAPM can only work in inefficient markets, because it only collects the historical data from the market. Right?
