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Capital Asset Pricing Model

The capital asset pricing model is a model used to determine a theoretically appropriate required rate of return of an asset, to make decisions about adding assets to a well-diversified portfolio.

The expected return equals the risk\[Hyphen]free interest rate plus the beta coefficient times the difference between the return on market and the risk\[Hyphen]free interest rate.

Formula

QuantityVariable["r", "Unitless"] == QuantityVariable[Subscript["r", "f"], "Unitless"] + QuantityVariable["β", "Unitless"]*(-QuantityVariable[Subscript["r", "f"], "Unitless"] + QuantityVariable[Subscript["r", "m"], "Unitless"])

symbol description physical quantity
r expected return "Unitless"
rf risk­free interest rate "Unitless"
β beta coefficient "Unitless"
rm return on market "Unitless"

Forms

Examples

Get the resource:

In[1]:=
ResourceObject["Capital Asset Pricing Model"]
Out[1]=

Get the formula:

In[2]:=
FormulaData[ResourceObject["Capital Asset Pricing Model"]]
Out[2]=

Use some values:

In[3]:=
FormulaData[ ResourceObject["Capital Asset Pricing Model"], {QuantityVariable[ \!\(\*SubscriptBox[\("r"\), \("f"\)]\),"Unitless"] -> None, QuantityVariable["r","Unitless"] -> Quantity[9, "Percent"]}]
Out[3]=

Source Metadata

  • Creator:
  • Date: 1961

Publisher Information