Applicability Evaluation to Capital Asset Pricing Model

economics, is considered to be the backbone of pricing theory in modern financial market. The model is simple and practical, and mainly adopted in researches on the relationship between the expected rate of assets return and the assets investment risk, as well as the formation mechanism of equilibrium price. The Capital Asset Pricing Theory is not fully applicable to a variety of abnormalities in financial markets and the special circumstances of China’s security market due to its strict assumptions and limitations in practical application. However, with the gradual improvement of China’s security market, CAPM theory, by appropriate modification, will play a major role in technical analysis thereon