Aretz, Kevin; Shackleton, Mark B. - In: Journal of Banking & Finance 35 (2011) 5, pp. 1213-1227
The study of Ferguson and Shockley (2003) shows that, if the Merton (1974) model can reflect reality, the omission of debt claims from the market portfolio proxy may explain the poor pricing ability of the CAPM in empirical tests. We critically re-assess this argument by first reviewing...