Portions of this article were drafted using an in-house natural language generation platform. The article was reviewed, fact-checked and edited by our editorial staff. The capital asset pricing model ...

Discover how the CAPM formula calculates expected returns based on investment risk. Understand its assumptions and learn how it guides financial decision-making.

One of the key insights of the CAPM is that it answers an important investment question: "What is the expected return if I purchase security XYZ?" The assumption that Sharpe built into the model is ...