The Capital Asset Pricing Model

The Capital Asset Pricing Model

The capital asset pricing model (CAPM) is an influential paradigm in financial risk management. It formalizes mean-variance optimization of a risky portfolio given the presence of a risk-free investment such as short-term government bonds. The CAPM defines the price of financial assets according to...

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Bibliographic Details
Main Author: James Ming Chen
Format: Article
Language:English
Published: MDPI AG 2021-09-01
Series:Encyclopedia
Subjects:
beta
Sharpe ratio
three-factor model
momentum
intertemporal CAPM
Roll’s critique
Online Access:https://www.mdpi.com/2673-8392/1/3/70
Description
Summary:The capital asset pricing model (CAPM) is an influential paradigm in financial risk management. It formalizes mean-variance optimization of a risky portfolio given the presence of a risk-free investment such as short-term government bonds. The CAPM defines the price of financial assets according to the premium demanded by investors for bearing excess risk.
ISSN:2673-8392

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