Corporate Finance Quiz
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RISK, RETURN, AND ASSET PRICING
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An academic study examines CAPM's performance during the 2008 financial crisis and finds that many stocks with low pre-crisis betas experienced larger losses than the model predicted, while some high-beta stocks fell less than expected. The study attributes this to 'flight-to-quality' behavior where investors rushed toward perceived safe assets regardless of historical beta relationships. This finding most directly challenges which CAPM assumption, and what does it imply for the model's practical application?
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