Capital Asset Pricing Model
May 1, 2024
Updated May 9, 2025
23 minute read
The Capital Asset Pricing Model, commonly known as CAPM, is a foundational concept in finance. At its core, CAPM provides a framework for determining the expected rate of return for an asset or investment. It uses the expected return on the market, a risk-free asset, and the asset's correlation or sensitivity to the market (known as beta) to make this calculation. Essentially, it attempts to quantify the relationship between systematic risk and the expected return.
7wjylw|
Find a path to becoming a Capital Asset Pricing Model. Learn more at:
OpenCourser.com/topic/7wjylw/capital
Featured in The Course Notes
This topic is mentioned in our blog,
The Course Notes. Read
one article that features
Capital Asset Pricing Model:
To read more articles from OpenCourser, visit:
OpenCourser.com/notes
Reading list
We've selected 28 books
that we think will supplement your
learning. Use these to
develop background knowledge, enrich your coursework, and gain a
deeper understanding of the topics covered in
Capital Asset Pricing Model.
This widely adopted textbook for introductory and intermediate investments courses at the undergraduate and graduate levels. It provides a thorough grounding in portfolio theory, asset pricing models including CAPM, and market efficiency. It is highly recommended for gaining a broad understanding of the topic and is frequently used as a primary teaching resource.
The groundbreaking work that introduced Modern Portfolio Theory (MPT), which is the direct precursor to CAPM. While published in 1959, its concepts of diversification and the efficient frontier are fundamental to understanding asset pricing. It must-read classic for serious students of finance.
A foundational text in financial econometrics, providing the essential statistical tools for testing asset pricing models and analyzing financial data. It crucial resource for graduate students and researchers conducting empirical work related to CAPM and market efficiency.
This graduate textbook provides a unified treatment of asset pricing and portfolio choice theory, building from first principles. It covers CAPM and more advanced models in a rigorous manner, suitable for students with a strong quantitative background.
Bridges the gap between asset pricing theory and its implementation in quantitative equity investment strategies. It discusses how models like CAPM inform portfolio construction and risk management. It is highly relevant for graduate students and professionals in quantitative finance roles.
A collection of influential papers, including key works by Fama on the efficient market hypothesis and asset pricing. Reading these original articles provides deep insight into the development of the theories underlying CAPM and related concepts.
A seminal textbook in corporate finance that covers the principles of valuation, risk, and return. It explains CAPM within the context of estimating the cost of equity, a crucial application in corporate decision-making. valuable reference for understanding the practical use of CAPM in a business setting and standard text in finance programs.
A more concise version of the comprehensive 'Investments' textbook by the same authors. It covers the essential concepts of portfolio theory and CAPM, making it suitable for shorter courses or for readers who want a less detailed introduction before tackling the full text. Ideal for undergraduates.
This handbook features contributions from leading experts on the equity risk premium, a critical input to the CAPM. It delves into the historical evidence, theoretical explanations (including the equity premium puzzle), and contemporary research on this topic.
Offers a broad perspective on financial economics, linking asset pricing theory with other key areas of finance. It provides a strong theoretical foundation for understanding CAPM within a larger economic context and is suitable for advanced undergraduate and graduate courses.
Provides a practical guide to applying econometric techniques to financial data, with sections relevant to testing asset pricing models and identifying market anomalies. It useful resource for researchers and practitioners focused on the empirical validation and application of CAPM.
Focuses on the application of quantitative methods to financial markets, including the empirical analysis of asset pricing models like CAPM. It is well-suited for students and professionals with a strong quantitative background interested in the data-driven aspects of asset pricing.
Another widely used investments textbook that offers a balanced approach to investment analysis and portfolio management, including a clear explanation of CAPM and its applications. It is suitable for undergraduate students and provides a solid understanding of the core concepts.
This practical book teaches financial modeling using spreadsheets and applies theoretical concepts, including CAPM, to real-world scenarios like valuation and portfolio analysis. It's highly valuable for students and professionals who need to implement asset pricing models in practice.
Provides a framework for understanding the economics of information, including a chapter on the Capital Asset Pricing Model (CAPM) as it applies to information asymmetries.
Provides a practical guide to behavioral finance, including a chapter on the Capital Asset Pricing Model (CAPM) and how it can be affected by behavioral biases.
Is another classic guide to value investing. It includes a chapter on the Capital Asset Pricing Model (CAPM), but it is primarily focused on other topics.
Classic guide to value investing. It includes a chapter on the Capital Asset Pricing Model (CAPM), but it is primarily focused on other topics.
Provides a practical guide to personal finance, including a chapter on the Capital Asset Pricing Model (CAPM) and how it can be used to make investment decisions.
Provides a practical guide to building wealth, including a chapter on the Capital Asset Pricing Model (CAPM) and how it can be used to make investment decisions.
For more information about how these books relate to this course, visit:
OpenCourser.com/topic/7wjylw/capital
Save
