meaning of Capital Asset Pricing Model

Capital Asset Pricing Model meaning in Finance Dictionary

A model for calculating expected equity returns. It's on the basis of the premise that comes back are the incentive to take on risk, hence threat may be split up into two sorts: stock-specific danger and marketplace threat. Since stock-specific danger are mitigated by variation guidelines, investors shouldn't be compensated for taking this in. Expected returns should simply be a function of this share's response to comes back on the market as a whole, which can be given by the share's beta.