Capital Asset Pricing Model
Capital Asset Pricing Model (CAPM) is a financial model that describes the relationship between the expected return of an asset and its systematic risk, measured by beta, using the risk-free rate and the expected market return.
Example: In a neutral context, a stock with beta 1.2, a risk-free rate of 2%, and an expected market return of 8% yields an estimated CAPM return of 9.6%.
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