Asset Pricing Theory

Pamela P. Drake, Frank J. Fabozzi and Francesco A. Fabozzi

Chapter 19 in Introduction to Finance:Financial Management and Investment Management, 2022, pp 551-575 from World Scientific Publishing Co. Pte. Ltd.

Abstract: Asset pricing theory seeks to describe the relationship between risk and expected return. Although we refer to asset pricing models in this chapter, what we mean is the expected return investors require given the risk associated with an investment. The two most well-known equilibrium asset pricing models are the capital asset pricing model (CAPM) and the arbitrage pricing theory (APT) model. In this chapter, we describe these two models.

Keywords: Financial Management; Investment Management; Derivatives; Common Stock; Bonds; Company Analysis; Entrepreneurial Finance; Financial Instruments; Financial System; Financial Statements; Time Value of Money; Yields; Present Value; Future Value; Financial Strategy; Dividend Policy (search for similar items in EconPapers)
JEL-codes: G1 G3 N2 O16 (search for similar items in EconPapers)
Date: 2022
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