The simple version of the CAPM assumes that investors have a single-period time horizon. When investors are assumed to be concerned with lifetime consumption and bequest plans, but investors’ tastes and security return distributions are stable over time, the market portfolio remains efficient and the simple version of the expected return–beta relationship holds. But if those distributions change unpredictably, or if investors seek to hedge nonmarket sources of risk to their consumption, the simple CAPM gives way to a multifactor version in which the security’s exposure to these nonmarket sources of risk command risk premiums. p-856