On the exclusion of assets from tests of the two-parameter model: A sensitivity analysis

This study investigates the sensitivity of tests of the CAPM to different sets of asset returns. Tests are conducted with market portfolios that include returns for bonds, real estate, and consumer durables in addition to common stocks. Even when stocks represent only 10% of the portfolio's value, inferences about the CAPM are virtually identical to those obtained with a stocks-only portfolio. In contrast, inferences are sensitive to the set of assets used in the tests.