1.   Yet the effort, far more costly than anything ever attempted by any government, has not produced the expected returns.

2.   This requires that the expected return from the short position exceeds the riskless rate.

3.   Investors are rational price takers who make their selection of wealth-producing assets using risks and the expected returns.

4.   As such it gauges the extent to which the expected return of the security is affected by the expected return of the market itself.

5.   The horizontal axis is now calibrated in units of beta rather than the standard deviation of expected returns.

6.   This means that there is data available to estimate betas, expected returns and risks.

7.   The CAPM specifies a relationship between market risk and the expected return on a security.

8.   However, expected returns cannot be observed.

9.   The model is couched in ex-ante terms as it specifies expected security returns as a function of the expected return on the market portfolio.

10.   The position of the portfolio Z dominates the sensitivity return combination of security X.