The Capital Asset Pricing Model (CAPM) is a financial model used to determine the expected return on an investment based on its systematic risk, represented by beta (β). The model establishes a relationship between the expected return of a security and its risk in relation to the overall market. It was developed in the 1960s by economists William Sharpe, John Lintner, and Jan Mossin.
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The expected excess return obeys in the mean-variance market model. The beta of an asset is a covariance-to-market-variance ratio.