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capital-asset pricing model (CAPM)

capital-asset pricing model (CAPM) definition - business

capital-asset pricing model (CAPM)

A mathematical model for asset pricing in which the relative riskiness of an asset is combined with the return on risk-free assets. This model, which uses beta, the widely used measure of risk, has been criticized; nevertheless, it is considered a very important element of modern investment and portfolio theory. See also capital market line.

The American Heritage® Dictionary of Business Terms Copyright © 2009 by Houghton Mifflin Harcourt Publishing Company. Published by Houghton Mifflin Harcourt Publishing Company. All rights reserved.

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