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Capital asset pricing model (CAPM) |
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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).Capital asset pricing model (CAPM) Similar MatchesPerfect capital marketPerfect capital marketA market in which there are never any arbitrage opportunities. Capitalisation issueCapitalisation issueSee 'scrip issue'. Unrealized capital gain or lossUnrealized capital gain or lossAn increase/decrease in the value of a security that is not "real" because the security has not been sold. Once a security is sold by the portfolio manager, the capital gain../../finance-glossary/losses are "realized" by the fund, and any payment to the shareholder is taxable during the tax year in which the security is sold. Total capitalizationTotal capitalizationThe total long-term debt and all types of equity of a company that constitutes its capital structure. Small capitalization (small cap) stocksSmall capitalization (small cap) stocksThe stocks of companies whose market value is less than $1 billion. Small-cap companies tend to grow faster than large-cap companies and typically use any stocks for expansion rather to pay dividends. They also are more volatile than large-cap companies, and have a higher failure rate. Further SuggestionsLeveraged recapitalizationCapital Gains Capital good Capital market line (CML) Short-term capital flow Capital control Net capital requirement Core capital Capital expenditures venture capital trust Capital loss Capital formation Long-term capital Capital gains tax Opportunity cost of capital Other capital loan capital authorised share capital Capitalization Weighted Index Capitalized interest issued share capital capital assets Capitalization ratios Morgan Stanley Capital International Emerging Markets Global Index market capitalisation |
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