Subject category:
Finance, Accounting and Control
Published by:
Centre for Islamic Banking and Finance
Length: 19 pages
Data source: Generalised experience
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https://casecent.re/p/21845
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Abstract
Capital market theory is an extension of portfolio theory. Portfolio theory considers how investors should act in selecting an optimal portfolio of risky securities. Capital market theory extends portfolio theory by asking what happens if all investors seek portfolio''s of risky securities under the Markowitz framework? How will this affect equilibrium security prices and returns? This note describes the model enabling us to do this, known as the Capital Asset Pricing Model (CAPM). CAPM allows us to measure the relevant risk of an individual security as well as to assess the relationship between risk and the returns from investing.
About
Abstract
Capital market theory is an extension of portfolio theory. Portfolio theory considers how investors should act in selecting an optimal portfolio of risky securities. Capital market theory extends portfolio theory by asking what happens if all investors seek portfolio''s of risky securities under the Markowitz framework? How will this affect equilibrium security prices and returns? This note describes the model enabling us to do this, known as the Capital Asset Pricing Model (CAPM). CAPM allows us to measure the relevant risk of an individual security as well as to assess the relationship between risk and the returns from investing.