CAPM and a new investment decision method

The traditional CAPM explains the return on each security, while the current study suggests a new methodology for “picking” a broad index, based on regression trees. Analysts’ recommendations on market prices are analyzed, and a one to three-stage method is employed. The analysis suggests a few rules of thumb (only one to three stages) for buying or selling the CRSP US market index. The findings are robust, and the rules are reliable. Researchers and practitioners may benefit greatly from the new rules.