Why the CAPM is Half-Right and Everything Else is Wrong

The global financial crisis has caused many academics to question the validity of market efficiency and the CAPM. A recent example of this is Dempsey (2013). We pick up on two central tenets of Dempsey's papermarket efficiency and the status of the CAPMand provide a critique. With respect to market efficiency, we argue that it is still very difficult to make abnormal returns from publicly available information and thus the basic tenet of market efficiency still holds. With respect to asset pricing models, we argue that the CAPM is still the reigning champion of asset pricing models and the belief that unless a model works 100% of the time that it should be rejected for an unspecified alternative is misplaced. In the spirit of a lively discussion we argue that the CAPM is half-right and everything else is wrong.