Taking stock.

Since the stock market bubble burst more than three years ago, investors have had ample time to ponder where to put the remains of their money. Economists and analysts too have been revisiting old ideas. None has been dearer to them than the capital asset pricing model (CAPM), a formula linking movements in a single share price to those of the market as a whole. The key statistic is "beta": the proportion of a given change in the market that, on average, is reflected in the price of the share. Although it is useful for compiling share portfolios--in particular, for working out their overall correlation with the market--it tells you little about share-price performance in absolute terms. In fact, the CAPM's obituary was already being written more than a decade ago when a paper by Eugene Fama and Kenneth French, then both at the University of Chicago, showed that the shares of small companies and "value stocks" (shares with low price-earnings ratios) do much better over time than their betas would predict. Even though shares have recovered some of their losses in recent months, the crash has left investors asking what became of the fabled equity premium, the amount by which they can expect returns on shares to exceed those from government bonds.