Difference between revisions of "Capital Asset Pricing Model"
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Latest revision as of 23:47, 1 November 2019
Capital Asset Pricing Model (also known by its acronym, CAPM) is a model based on the proposition that any stock's required rate of return is equal to the risk-free rate of return plus a risk premium reflecting only the risk remaining after diversification. The CAPM equation is ri =rRF +b i(rM − rRF).
Definitions
According to Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition),
- Capital Asset Pricing Model (CAPM). A model based on the proposition that any stock's required rate of return is equal to the risk-free rate of return plus a risk premium reflecting only the risk remaining after diversification. The CAPM equation is ri =rRF +b i(rM − rRF).
Related concepts
- Financial management. A combination of enterprise efforts undertaken in order to procure and utilize monetary resources of the enterprise.
