See my answer to Paul below. Same thing applies for the CAPM: it’s an approximation, and the expected value formula is the efficiency condition which correctly accounts for how much margin one should actually expect to be able to get, as well as the effect of margin calls.
(In the expected value formula, beta is wrapped into the discount factor; the CAPM approximation pulls it out.)
See my answer to Paul below. Same thing applies for the CAPM: it’s an approximation, and the expected value formula is the efficiency condition which correctly accounts for how much margin one should actually expect to be able to get, as well as the effect of margin calls.
(In the expected value formula, beta is wrapped into the discount factor; the CAPM approximation pulls it out.)