THE CAPITAL ASSET PRICING MODEL (CAPM)
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Back in the 1960s, a couple of Ivy League professors developed
a theory for pricing stocks and other capital assets that has shaped current
investment theory. They subsequently won a Nobel Prize in economics for their
work. The Capital Asset Pricing Model (CAPM) has indeed been one of the most
important investment concepts of the last half-century. The most profound effect
of the CAPM is that it has given us a straightforward way to determine expected
returns on risky investments.
In this tutorial you will learn about the following subjects
related to the CAPM:
- What Is the Capital Asset Pricing Model?
- ELEMENTS OF THE CAPITAL ASSET PRICING MODEL
- Calculating Expected Returns Using the Capital Asset Pricing Model
- SUMMARY OF THE CAPITAL ASSET PRICING MODEL
Let's start by looking at some of the basics of the
CAPM.
