Meaning CAPITAL ASSET PRICING MODEL (CAPM): An economic theory that describes the relationship between risk and expected return, and serves as a model for the pricing of risky securities. The CAPM asserts that the only risk that is priced by rational investors is systematic risk, because that risk cannot be eliminated by diversification. The CAPM says that the expected return of a security or a portfolio is equal to the rate on a risk-free security plus a risk premium multiplied by the assets systematic risk. Theory was invented by William Sharpe (1964) and John Lintner (1965)
More terms such as Capital asset pricing model (CAPM) in Dictionary C.
- Definition Commodity Futures Contract:
- Examples An agreement to buy a specific amount of a commodity at a specified price on a particular date in the future, allowing a producer to guarantee the price of a product or raw material used in production capital asset pricing model (capm) definition.
- Definition Capital Requirements:
- Examples Financing required for the operation of a business, composed of long-term and working capital plus fixed assets capital asset pricing model (capm) explain.
- Definition Credible Signal:
- Examples A signal that provides accurate information; a signal that can distinguish among senders capital asset pricing model (capm) what is.
- Definition Caveat Emptor, Caveat Subscriptor:
- Examples Latin expressions for buyer beware and seller beware, which warn of overly risky, inadequately protected markets capital asset pricing model (capm) meaning.
- Definition Capital Market Line (CML):
- Examples every combination of the risk-free asset and the market portfolio. The line represents the risk premium you earn for taking on extra risk. Defined by the capital asset pricing model capital asset pricing model (capm) abbreviation.
