Enhanced CAPM / Modified CAPM / Buildup Approach

CFA Level II
#1

I thought enhanced CAPM was the same was modified CAPM, but is it? Does anyone know. Also, have conflicting buildup approach from CFAI vs Schweser.

CFAI text refers to modified CAPM: Risk-free rate + Beta × Equity risk premium + Size premium

But Schweser Notes makes no mention of modified CAPM… Instead, they have Enhanced CAPM: Risk-free rate + Beta × Equity risk premium + Size premium + Company premium

Then there’s buildup model. CFAI text says the buildup model is: Risk-free rate + Equity risk premium + Size premium_i_ + Specific-company premium_i_

While Schweser says buildup model is: Risk-free rate + Equity risk premium + Size premium + Company premium + Industry premium

#2

All I know is there are NO betas in the build up method.

#3

Technically Beta is 1 under build up method. Also, I’ve been using the Schweser method on all tests and have had no issue so far.

Did the same thing with expanded CAPM and I’ve had no problems.

#4

Refresh my memory: who writes the June 23rd exam?

1 Like
#5

why beta is 1 in buildup method…read something L1 now cant recall it and couldnot find appropriate answer in google…