Portfolio Theory
Capital Asset Pricing Model
Definition
What is Capital Asset Pricing Model?
A model linking expected return to the risk-free rate, market risk premium, and an asset's beta.
Example in practice
How This Looks in Practice
A higher-beta share receives a higher required return under CAPM.
Keep learning
Related Terms
Portfolio Theory
Security Market Line
A line showing the CAPM relationship between expected return and beta.
Portfolio TheoryEfficient Frontier
The set of portfolios offering the highest expected return for each level of risk under stated assumptions.
Portfolio TheoryMinimum-Variance Portfolio
The portfolio with the lowest expected variance among the available combinations.
Fraud & ScamsPonzi Scheme
A fraud that pays earlier participants using money from newer participants rather than genuine investment profits.