What is the 'CAPM'?

The Capital Asset Pricing Model is a model that describes the relationship between risk and expected return, helping in the pricing of risky securities. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

Term of the Day | Words to Know Capital Asset Pricing Model (CAPM) The Capital Asset Pricing Model (CAPM) describes the relationship between systematic risk and expected return for assets, particularly stocks. CAPM is widely used throughout finance for pricing risky securities and generating expected returns for assets given the risk of those assets and cost of capital. Read More » Related to "Capital Asset Pricing Model (CAPM)" Explaining The Capital Asset Pricing Model (CAPM) The capital asset pricing model (CAPM) provides a useful measure that helps investors determine what sort of investment return they deserve for putting their money at risk on a particular stock. Read More » CAPM Model: Advantages and Disadvantages The capital asset pricing model (CAPM), while criticized for its unrealistic assumptions, provides a more useful outcome than some other return models. Here is how CAPM works and its pros and cons. Read More » How Investment Risk Is Quantified FInancial advisors and wealth management firms use a variety of tools based on modern portfolio theory to quantify investment risk. However, along with the efficient frontier, statistical measures and methods including value at risk (VaR) and capital asset pricing model (CAPM) can all be used to measure risk. Read More » SPONSORED BY VANGUARD 3 Saving Habits to Steal and 3 to Skip You work hard for your cash. Keep it working for you with these high-impact saving strategies. Learn More » Related Definitions Expected Return Expected return is the amount of profit or loss an investor can anticipate receiving on an investment. Based on historical data, it's not a guaranteed result; rather, it's a tool used to determine whether an investment has a positive or negative average net outcome. Read More » Security A security is a fungible, negotiable financial instrument that represents some type of financial value, usually in the form of a stock, bond, or option. Read More » Cost of Capital Cost of capital is the required return a company needs in order to make a capital budgeting project, such as building a new factory, worthwhile. Read More » Time Value of Money The time value of money is the idea that money presently available is worth more than the same amount in the future due to its potential earning capacity. Read More » CONNECT WITH INVESTOPEDIA Email sent to: mondemand.forex@blogger.com To update your newsletter preferences or unsubscribe, click here. 114 West 41st St, floor 8 New York NY 10036 © 2019, Investopedia, LLC, All Rights Reserved | Privacy Policy