β

It is uncontroversial to state that academic finance theory underwent a revolution in the 1950s and 1960s.While major breakthroughs occurred on several fronts around this time, the most relevant to the current debate is in the area of asset pricing.The revolution began with the work of Markowitz (1952, 1959), who formalized our understanding of diversification and portfolio theory. It culminated in the development of the CAPM by Sharpe (1964) and Lintner (1965)"”a deceptively simple formulation that says there is a positive and linear relationship between (covariance) risk, b, and expected return. Indeed, beta risk has since become the iconic symbol of the CAPM to which all students of finance very quickly relate. Dempsey (2013) argues that the CAPM, while revolutionary, has failed. Given the considerable influence (and oftentimes, dominance) that this asset pricing paradigm has enjoyed over the past half century in the classroom, in research and in practice, his claim is highly controversial. Indeed, an extreme view of Dempsey's work demands (as he states in his paper) that we revert our thinking to that which prevailed in pre-CAPM times. In effect, he asks us to abandon b. The purpose of our paper is to critically assess and respond to the major elements of Dempsey's argument. While we identify some areas of agreement, our overall view is that the message coming from his work is greatly overstated, somewhat distorted and, thus, unduly 'nihilistic'. As such, we are keen to provide a more balanced assessment of the success/failure of the CAPM and its asset pricing descendants.