What would be the least likely to occur if the basic assumption of the capital asset pricing model (CAPM), that there are no transaction costs is relaxed?
Each investor can have a unique view of a security market line
If the assumption of no transaction cost is relaxed, then investors will correct mispricing only up to the point where transaction costs begin to offset potential excess return. As a result, all securities will plot within a band around the SML. It also would impact diversification, since at some point the transaction cost will offset the benefits of diversification.
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