The CAPM is intended to allow investors to calculate the required or appropriate expected rate of return on a security, not a realized rate of return. Realized returns are calculated, by definition, after the fact while the CAPM is used before the fact.

Elasticity falls as you move down along a linear demand curve.

In this case the economic profit 0.

Many portfolios are structured to hold larger portions, perhaps 5% of the portfolio, in individual blue chip stocks and only small amounts (perhaps 0.5%) in individual small firms that are considered more risky. In this case, a market value-weighted index is more representative of the investment policy and should be used as a benchmark.