Glossary

Glossary

Term Book Chapter Definition
Capital Asset Pricing Model (CAPM) Behavioral Finance Chapter 4: Behavioral Finance in Investing A traditional model of asset pricing that assumes market efficiency, meaning asset prices fully reflect all available information.
Capital Asset Pricing Model (CAPM) CFA Level 1 Exam Chapter 5: Corporate Finance A model used to calculate the cost of equity. The CAPM formula is: Cost of Equity = Risk-free rate + Beta (Market rate of return - Risk-free rate).
Capital Asset Pricing Model (CAPM) Corporate Finance Chapter 6: Risk and Return The CAPM extends portfolio theory by providing a framework to evaluate the expected return of an asset based on its systematic risk.