HomeDefinitionsCompareDebt Capital asset pricing model (CAPM)The financial definition for Capital asset pricing model (CAPM):An economic theory that describes the relationship between risk and expected return, and serves as a model for the pricing of risky securities. The CAPM asserts that the only risk that is priced by rational investors is systematic risk, because that risk cannot be eliminated by diversification. The CAPM says that the expected return of a security or a portfolio is equal to the rate on a risk-free security plus a risk premium multiplied by the assets systematic risk. Theory was invented by William Sharpe (1964) and John Lintner (1965). Similar MatchesCapitalCapitalMoney invested in a firm. Capital accountCapital accountNet result of public and private international investment and lending activities. Capital allocation decisionCapital allocation decisionAllocation of invested funds between risk-free assets and the risky portfolio. Further SuggestionsCapital appreciationCapital appreciation fund Capital asset Capital Builder Account (CBA) Capital expenditures Capital flight Capital formation Click to compare definitions of Capital asset pricing model (CAPM) Click to view definitions beginning ca |