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Capital asset pricing model

   Also found in: Acronyms, Wikipedia, Hutchinson 0.06 sec.
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 asset's systematic risk. Theory was invented by William Sharpe (1964) and John Lintner (1965). The early work of Jack Treynor is was also instrumental in the development of this model.
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The most commonly accepted method in finance is the capital asset pricing model (CAPM).
Assessing new project risk by determining new project beta values by Tarantino, David / Physician Executive
Beginning with the 2006 price setting, the Board will use only a capital asset pricing model (CAPM) to determine a return on equity (ROE) that reflects the return earned by private-sector service providers.
Modifications to methodology used to calculate private-sector ... by Federal Reserve Bulletin
The capital asset pricing model (CAPM), first introduced by Sharpe (1964) and Lintner (1966), has made a profound impact on the way investors understand the relationship between price and risk of capital assets.
Time-series analysis of return and beta in U.S by Park, Kwang Woo / Journal of Academy of Business and Economics
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