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According to Bloomberg since 1964 Berkshire Hathaway (Warren Buffetts firm) has delivered a total return of 2,500,000%, or a (geometric) average return of 20.62% per
According to Bloomberg since 1964 Berkshire Hathaway (Warren Buffetts firm) has delivered a total return of 2,500,000%, or a (geometric) average return of 20.62% per year.
However, the CAPM predicts that Berkshire Hathaways return should only have been 9.5% on average.
Why is this problematic for the CAPM?
- It shows Berkshire Hathaway can generate large and persistent alpha.
- It shows that Warren Buffett can generate large returns.
- It shows that Berkshire Hathaway was a good stock to own.
- Not enough information is given to answer this.
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