Measuring industry mispricing: An empirical analysis of CAPM alphas for U.S. industry portfolios

This study examines industry-level valuation through the framework of the Capital Asset Pricing Model (CAPM) using monthly data for 49 U.S. industry portfolios from January 2000 to November 2025. First, a graphical analysis of total risk and return provides preliminary evidence of a positive risk–return relationship across industries. To isolate systematic risk, CAPM regressions are estimated to obtain industry betas and Jensen’s alphas. The Security Market Line (SML) is then used to assess whet