Underwriting Betas - The Shadows of Ghosts

This paper critiques the methodologies used in prior studies to estimate underwriting betas for application in the "insurance CAPM." It argues that reliable estimates of underwriting betas do not exist. It also demonstrates the inapplicability of the CAPM to the yield to maturity of a bond or portfolio of bonds. Finally, it demonstrates that the assumption that the yield on a U.S. Treasury bill is risk-free for purposes of applying the CAPM implies that all U.S. Treasury securities, regardless of maturity, have betas of zero.