The Capital Asset Pricing Model (CAPM) is a financial model used to determine the expected return of an investment based on its risk. It is used to calculate the expected return of a security given its risk level and the expected return of the overall market. The CAPM is based on the
In finance, the capital asset pricing model (CAPM) is a model used to determine a theoretically appropriate required rate of return of an asset, to make decisions about adding assets to a well-diversified portfolio. The model takes into account the asset's sensitivity to non-diversifiable risk, often represented by the quantity beta (β) in the financial industry, as well as the expected return of the market and the expected return of a theoretical risk-free asset.