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Capital Asset Pricing Model

Capital Asset Pricing Model (CAPM)

Definition

Capital Asset Pricing Model (CAPM) — an asset valuation model that describes the relationship between expected risk and expected return for marketable assets. The CAPM states that the intercept of a regression equation between an asset's returns and the returns of systematic factors equals 0 percent in an efficient market, but it does not necessarily assume a single source of systematic risk.

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