What is the 'Capital Asset Pricing Model - CAPM'?

Capital Asset Pricing Model is a model that describes the relationship between risk and expected return — it helps in the pricing of risky securities. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

Term of the Day | INVESTOPEDIA Capital Asset Pricing Model - CAPM The capital asset pricing model is a model that describes the relationship between systematic risk and expected return for assets, particularly stocks. CAPM is widely used throughout finance for the pricing of risky securities, generating expected returns for assets given the risk of those assets and calculating costs of capital. Breaking it Down: The general idea behind CAPM is that investors need to be compensated... Read More » Related to "Capital Asset Pricing Model - CAPM" The Capital Asset Pricing Model: an Overview CAPM helps you determine what return you deserve for putting your money at risk. Read More » How do I use the CAPM (capital asset pricing model) to determine cost of equity? Learn about the elements of the capital asset pricing model, and discover how to calculate a business' cost of equity financing with this formula. Read More » The Advantages and Disadvantages of the CAPM Model In many situations, CAPM, while criticized for its unrealistic assumptions, provides a more useful outcome than either the DDM or WACC. Read More » Related Definitions International Beta International beta (often known as "global beta") is a measure of the systematic risk or volatility of a stock or portfolio in relation to a global market, rather than a domestic market. Read More » Market Risk Premium Market risk premium is the difference between the expected return on a market portfolio and the risk-free rate. Read More » Security Market Line - SML The security market line (SML) is a line drawn on a chart that serves as a graphical representation of the capital asset pricing model. Read More » William F. Sharpe William F. Sharpe is an American economist who won the 1990 Nobel Prize in Economic Sciences for developing models to assist with investment decisions. Read More » CONNECT WITH INVESTOPEDIA Email sent to: mondemand.forex@blogger.com If you wish to unsubscribe, please click here, or manage subscriptions 114 West 41st St, floor 8 New York NY 10036 © 2018, Investopedia, LLC, All Rights Reserved | Privacy Policy