The CAPM is an equation for $$ and it should be correct, provided the model's assumptions are met and provided supply equals demand $($i$.$e$.,$ a state of equilibrium exists$).$ The CAPM assumes investors are $,$ and that they make investment decisions based on the $$ return of their total portfolio and the

$$ of their total portfolio. In the CAPM, the asset's $$ represents its correlation with value changes of the market $().$ In practice for equity valuation, the market is represented by a $$ such as the S&P$500.$ Because valuation is forward looking, it is logical to adjust the $($regressed$,$ unadjusted$)$ beta so it more accurately predicts a $$ beta. The beta value in a future period has been found to be on average closer to the mean value of $1\mathrm{.}0($the beta of average systematic risk$)$ than to the value of the raw beta. The Blume adjustment is to take a weighted average of the raw beta and $1\mathrm{.}0,$ with the raw $($unadjusted$)$ beta having a weight of $$ and the beta of an average$-$systematic$-$risk security $(1\mathrm{.}0)$ having a weight of $$