The Capital Asset Pricing Model: Theory and Evidence

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The capital asset pricing model (CAPM) of William Sharpe (1964) and John Lintner (1965) marks the birth of asset pricing theory (resulting in a Nobel Prize for Sharpe in 1990).  Four decades later, the CAPM is still widely used in applications, such as estimating the cost of capital for firms and evaluating the performance of managed portfolios.

Authors: Eugene F. Fama, Ph.D., University of Chicago & Kenneth R. French Ph.D., Dartmouth College

The capital asset pricing model (CAPM) of William Sharpe (1964) and John Lintner (1965) marks the birth of asset pricing theory (resulting in a Nobel Prize for Sharpe in 1990).  Four decades later, the CAPM is still widely used in applications, such as estimating the cost of capital for firms and evaluating the performance of managed portfolios.  It is the centerpiece of MBA investment courses.  Indeed, it is often the only asset pricing model taught in these courses.

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