The assumptions implicit in the version of the model discussed here are that
(1) all investors choose mean-variance efficient portfolios with a one-period horizon, although they need not have identical utility functions; (2) all investors have the same subjective expectations on the
means, variances, and covariances of returns; and (3) the market is
fully efficient in that there are no transaction costs, indivisibilities,
taxes, or constraints on borrowing or lending at a risk-free rate.