The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Capital Asset Pricing Model

  • M. J. Brennan
Reference work entry
DOI: https://doi.org/10.1057/978-1-349-95189-5_553

Abstract

Two general approaches to the problem of valuing assets under uncertainty may be distinguished. The first approach relies on arbitrage arguments of one kind or another, while under the second approach equilibrium asset prices are obtained by equating endogenously determined asset demands to asset supplies, which are typically taken as exogenous. The capital asset pricing model (CAPM) is an example of an equilibrium model in which asset prices are related to the exogenous data, the tastes and endowments of investors, although the CAPM is often presented as a relative pricing model.

Keywords

Arbitrage pricing theory Asset price anomalies Capital asset pricing model Consumption capital asset pricing model International asset pricing model Intertemporal capital asset pricing model Mean-variance analysis Portfolio theory Pricing kernels Probability distributions Relative pricing models Risk aversion Separation Tobin separation theorem von Neumann and Morgenstern 
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Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • M. J. Brennan
    • 1
  1. 1.