<Li> CAPM assumes that all active and potential shareholders will consider all of their assets and optimize one portfolio . This is in sharp contradiction with portfolios that are held by individual shareholders: humans tend to have fragmented portfolios or, rather, multiple portfolios: for each goal one portfolio--see behavioral portfolio theory and Maslowian portfolio theory . </Li> <Li> Empirical tests show market anomalies like the size and value effect that cannot be explained by the CAPM . For details see the Fama--French three - factor model . </Li>

Risk free rate plus beta times risk premium