Series 3: 3.2.1.2. Capital Asset Pricing Model

Taken from our Series 3 Online Guide

3.2.1.1.  Capital Asset Pricing Model

The measure of a security’s systematic risk is commonly referred to as its beta. Beta is a ratio that measures the tendency of a security’s returns to respond to swings in the market. It is determined statistically by examining a security’s historical performance against the performance of the market. Beta is used as an input to a model that estimates the expected return of a security or portfolio of securities. That model is called the capital asset pricing model.

The capital asset pricin

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