Necessary Conditions for the CAPM

The general restrictions on all economic primitives (i.e., (a) endowments, (b) preferences, and (c) asset return distributions) that yield the CAPM under the expected utility paradigm are provided. These results are then used to derive the class of restrictions on preferences and the distribution of asset returns alone that provides the CAPM. We also show that the conditions that provide the CAPM and derived preferences over mean and variance are equivalent. Consequently, this paper also resolves the question of when mean–variance maximization is consistent with expected utility maximization.