|
|
Capital asset pricing model (CAPM) |
|
|
|
 Home Site Map Add Term Search About Us Contributors |
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 MatchesCapital infusionCapital infusionAn increase in financial capital provided from outside a bank, corporation, or other entity. Short term capital gainShort term capital gainA profit on the sale of a security or mutual fund share that has been held for one year or less. A short-term capital gain is taxed as ordinary income. Capital market imperfectionCapital market imperfectionAnything that interferes with the ability of economic agents to borrow and lend as much as they wish at a fixed rate of interest that truly reflects probability of repayment. A common source of imperfection is asymmetric information. Perfect capital marketPerfect capital marketA market in which there are never any arbitrage opportunities. Capital Builder Account (CBA)Capital Builder Account (CBA)A Merrill Lynch brokerage account that allows investors to access the loan value of his or her eligible securities to buy or sell securities. Excess cash in a CBA can be invested in a money market fund or an insured money market deposit account without losing access to the money. Further SuggestionsPersonal tax view (of capital structure)Capital intensity Recapitalization proposal paid in capital Issued share capital capital gain capital asset pricing model Capital Fulcrum Point Pie model of capital structure Undercapitalized Net capital requirement authorised share capital Contributed capital capital expenditure Working capital Capital intensive Capital good Capital risk capital Efficient capital market Total capitalization overcapitalised working capital capital employed Small capitalization (small cap) stocks |
|
|
|