I can’t figure out how the expected market return is calculated. I understand it’s function in CAPM and in determining beta. But I don’t see how any value for expected market return, market covariance with your stock, or variance of the market, that you’re given is reliable. Has someone ever calculated the expected return for each asset available, the SD for each asset, or correlation between every pair of assets? To me this seems like the #1 flaw of CAPM because subjective probabilities are needed to even generate variance!!!

sure there are many ways to calculate beta, at the very least. it would be difficult to make a fortune using only CAPM. it is only one of many tools in equity research.

Which part of the variance calculation requires subjective probabilities? It can be calculated very easily if you have the daily returns of a stock, the market, industry, etc. The same can be done for correlation coefficients. From my understanding, the only difference in calculating betas depends on if you take daily, monthly, yearly, or hourly returns. Other than that, isn’t it calculated the exact same way no matter what?