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Intermediate Financial Theory, 3rd Edition by John B. Donaldson, Jean-Pierre Danthine

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Chapter 8

The Capital Asset Pricing Model

Chapter 8 moves the discussion from the focus on the demand for financial assets of different risk levels into the equilibrium determination of their prices and expected future rates of return. The entire chapter is devoted to the classic Capital Asset Pricing Model (CAPM) whose intellectual foundation lies in the mean-variance portfolio theory of Chapters 6 and 7.

Keywords

Modern portfolio theory; capital asset pricing model; capital market line; zero-beta CAPM; security market line; lottery stocks; CAPM anomalies

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