A critique of the asset pricing

theory's tests
Part I: On past and potential
testability of the theory
By Richard Roll

1
 The Results
• “The two-parameter asset pricing theory is
testable in principle; but arguments are given
here that: (a) No correct and unambiguous
test of the theory has appeared in the
literature, and (b) there is practically no
possibility that such a test can be
accomplished in the future.”
• Main takeaways: Logic, math, empirical
design, and inference

4/12/2012 A critique of capital asset pricing tests 2

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