(Mberiah Only)FIN301: THE CAPITAL ASSET PRICING MODEL (APPLE)

Module 3 - Background

The Capital Asset Pricing Model

Required Reading

I personally recommend reading up on the basic concepts behind the Capital Asset Pricing Model first before worrying about the formula. But still many of you are eager to learn the formulas first, so here are a few links below. But don't fixate on the formulas, spend an equal if not greater amount of time reading up on the basic concepts:

Investopedia (n.d.). Capital Asset Pricing Model, retrieved from: http://www.investopedia.com/terms/c/capm.asp

MoneyChimp, (n.d.) CAPM calculator, retrieved from: http://www.moneychimp.com/articles/valuation/capm.htm

QFinance, (n.d.) Capital Asset Pricing Model, retrieved from: http://www.qfinance.com/asset-management-calculations/capital-asset-pricing-model

Value Based Management, (n.d.) Capital Asset Pricing Model, retrieved from: http://www.valuebasedmanagement.net/methods_capm.html

To gain a deeper understanding of the CAPM and associated concepts beyond just the formula, read:

Damodaran, A. (n.d). Picking the right projects: Investment analysis. Retrieved from: http://pages.stern.nyu.edu/~adamodar/pdfiles/cfovhds/inv.pdf

Risk and Return (1991). The Economist, 318, 72-73

This Article on Investment Analysis is a highly comprehensive overview on measuring risk and the use of the CAPM. This article is a good place to start because it will give you an idea of how the CAPM is used in the "real world" as well as demonstrate the basic concepts of this Module.

Optional Reading

Financial Concepts: Capital Asset Pricing Model. (n.d.). Retrieved from http://www.investopedia.com/university/concepts/concepts8.asp

Value Based Management Net, Capital Asset Pricing Model, Retrieved from: http://www.valuebasedmanagement.net/methods_capm.html

Teach Me Finance has a good Page on the CAPM as well as a page on the Security Market Line. These are some brief but informative tutorials on these important topics.

Here is a good slide presentation on Risk and Return. For an alternative slide presentation, Click Here. No need to go through both of them, pick one or the other. You will get quite of bit of detail about this topic from these presentations.

If you still want even more information about the CAPM, the meta-sites below will do the trick:

Investopedia.com's CAPM Overview along with this good Page on the CAPM is worth looking over.

Business.com has a good List of Links on the CAPM (but please ignore the references to the Certified Associate in Project Management also nicknamed "CAPM").