Difference between revisions of "Capital Asset Pricing Model"
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| − | + | [[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== | ==Definitions== | ||
According to [[Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition)]], | According to [[Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition)]], | ||
| − | : | + | :[[Capital Asset Pricing Model]] ([[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== | ==Related concepts== | ||
Revision as of 07:03, 30 October 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.
