Many investors use the capital asset pricing model (CAPM) as a way to estimate the potential return of a stock or other asset within the context of its intrinsic risk. Used primarily to analyze ...

For simplicity, assume no inflation. Basically, the real yield on long-term treasuries is Rf. The expected return on equities is ERi, which is the risk-free rate plus the premium investors demand in ...

Black, Fischer, Michael C. Jensen, and Myron Scholes. "The Capital Asset Pricing Model: Some Empirical Tests." In Studies in the Theory of Capital Markets, edited by ...

The cost of equity funding is generally determined using the capital asset pricing model (CAPM). This formula utilizes the ...

Merton, Robert C. "A Reexamination of the Capital Asset Pricing Model." In Studies in Risk and Return, edited by J. Bicksler and I. Friend. Cambridge, MA: Ballinger Publishing Company, 1977.

Testing across hundreds of company's datasets shows lower prediction errors and reduced unexplainable return compared to classic asset pricing models like CAPM or Fama-French 3-Factor model.