THE CAPM IS WANTED, DEAD OR ALIVE

Kothari, Shanken, and Sloan (1995) claim that beta s from annual retur ns produce a stronger positive relation between beta and average retur n than ps from monthly returns. They also contend that the relation be tween average return and book-to-market equity (BE/ME) is seriously ex aggerated by survivor bias. We argue that survivor bias does not expla in the relation between BE/ME and average return. We also show that an nual and monthly beta s produce the same inferences about the beta pre mium. Our main point on the beta premium is, however, more basic. It c annot save the Capital asset pricing model (CAPM), given the evidence that beta alone cannot explain expected return.