That is an interesting paper you have written on SSRN. Have you read Ayn Rand? Your argument is essentially that CAPM doesn't work because rather than being rational egoists, people are what she would describe as irrational "second-handers," living and investing not by their independent judgment, but by and through others.

What would be really interesting would be to study how well the model fit in different countries - some cultures are more collectivist and would have a greater tendency to invest on a socially relativistic basis than others, right? Chinese culture generally frowns upon independent judgment, and is quite focused on relative status. This may help explain the recent Chinese stock market boom?