Project valuation and investment decisions: CAPM versus arbitrage

Carlo Alberto Magni

Applied Financial Economics Letters, 2007, vol. 3, issue 2, 137-140

Abstract: This study shows that (a) project valuation via CAPM contradicts valuation via arbitrage pricing, (b) CAPM-minded decision makers may fail to profit from arbitrage opportunities, (c) Standard CAPM-based valuation violates value additivity. As a consequence, the use of CAPM for project valuation and decision making should be reconsidered.

Date: 2007
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DOI: 10.1080/17446540500426821

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