In the case of a stock with negative beta and non-zero volatility, under CAPM the required return is less than the risk-free rate. This seems contradictory under CAPM assumptions that investors are rational/risk-averse and can invest unlimited amounts at the risk-free rate.
How should required returns less than the risk-free rate be interpreted? Why would a risk-averse investor purchase a stock with less return than the risk-free rate?