A risk consultant is advising a pension fund to revise its asset allocation approach to be more consistent with the theory of CAPM. The consultant prepares a list of the assumptions of CAPM to support the advice. Which of the following is an assumption of CAPM?

Exam-Like

There are transaction costs associated with buying and selling assets.

An individual investor can affect the price of a stock by buying or selling that stock.

Investors make their investment decisions by taking into account their personal income taxes.

Investors have the same expectations regarding the expected returns and the variance of returns of all assets.

Financial Risk Manager Part 1