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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 MatchesMorgan Stanley Capital International Europe IndexMorgan Stanley Capital International Europe IndexA market capitalization-weighted benchmark index made up of equities from 15 European countries. France, Germany, and the United Kingdom represent about two-thirds of the index. Capital appreciation fundCapital appreciation fundSee: Aggressive growth fund Net capital requirementNet capital requirementSEC requirement that SEC and nonmember SEC SEC-SECs maintain a maximum ratio of indebtedness to liquid SEC of 15 to 1. Issued share capitalIssued share capitalThe amount of authorised share capital that shareholders have actually subscribed to a company for share ownership. Capital sharesCapital sharesShares which entitle the holder to receive the capital appreciation from a split capital investment trust. The other type of shares in such a fund are income shares which receive the fund's income. Further SuggestionsMarginal efficiency of capitalCapital appreciation or depreciation Capital control Capital goods Free capital markets risk capital capital employed Overcapitalization Perfectly mobile capital Venture Capital capital structure Capital investment capital gain Capital flight Maximum capital gains mutual fund Hard capital rationing Capitalization rate Small capitalization (small cap) stocks Venture capital limited partnership Capital stock Capital account deficit venture capital Small capitalization (small cap) fund Capital gains distribution paid in capital |
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