Capital Asset Pricing Model (CAPM)

Securities Market Line of the Capital Asset Pricing Model (CAPM)
An asset valuation model describing the relationship between expected risk and expected return for marketable assets. The CAPM posits that the intercept of a regression equation between an asset's returns and the returns of systematic factors equal 0% in an efficient market, but it does not necessarily assume a single source of systematic risk. Although this classic model embodied in the security market line is not always empirically affirmed, it is the most widely used approach to relative asset evaluation. Also called Mean Variance (MV) Portfolio Model, Modern Portfolio Theory (MPT). See also Random Walk Hypothesis, Market Line. See E-V Maxim.

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