Transcription of The Capital Asset Pricing Model: Theory and Evidence
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The Capital Asset Pricing Model: Theory and EvidenceEugene F. Fama and Kenneth R. FrenchThe Capital Asset Pricing model (CAPM) of william Sharpe (1964) and JohnLintner (1965) marks the birth of Asset Pricing Theory (resulting in aNobel Prize for Sharpe in 1990). Four decades later, the CAPM is stillwidely used in applications, such as estimating the cost of Capital for firms andevaluating the performance of managed portfolios. It is the centerpiece of MBAinvestment courses. Indeed, it is often the only Asset Pricing model taught in attraction of the CAPM is that it offers powerful and intuitively pleasingpredictions about how to measure risk and the relation between expected returnand risk.
Eugene F. Fama and Kenneth R. French T he 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
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