It is only valid within a special set of assumptions. The model is a one period model. This is, everyone have the same information at the same time. Asset returns are distributed by the normal distribution. There is a definite number of assets and their quantities are fixed within the one period world.
All assets are perfectly divisible and priced in a perfectly competitive marked.
Asset markets are frictionless and information is costless and simultaneously available to all investors. There are no market imperfections such as taxes, regulations, or restrictions on short selling. The derivation of the CAP-model starts by assuming that all assets are stochastic and follow a normal distribution. The mean value is a measure of location among many such as median and mode. Likewise, the variance value is a measure of dispersion among many such as range, semiinterquartile range, semivariance, mean absolute deviation.