Capital Asset Pricing Model (CAPM)

Igor V. Evstigneev, Thorsten Hens and Klaus Schenk-Hoppé
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Igor V. Evstigneev: University of Manchester
Thorsten Hens: University of Zurich

Chapter 7 in Mathematical Financial Economics, 2015, pp 53-59 from Springer

Abstract: Abstract The chapter introduces the reader to the celebrated Capital Asset Pricing Model (CAPM). It opens with the statement of a general version of the CAPM followed by a proof based on an explicit formula for the efficient portfolios. It then outlines an equilibrium model for the CAPM, defines the concepts of the market portfolio and capitalization weights and establishes the efficiency of the market portfolio. The highlight of the chapter is the Sharpe-Lintner-Mossin CAPM formula. Key notions related to it (the beta of an asset, risk premium, etc.) are defined and discussed.

Keywords: Risk Premium; Portfolio Selection; Risky Asset; Risk Tolerance; Capital Asset Price Model (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sptchp:978-3-319-16571-4_7

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DOI: 10.1007/978-3-319-16571-4_7

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