The capital asset pricing model (or CAPM) hypothesizes that assets with the same level of systematic risk should experience the same level of returns.

Question

Quizplus · Accepted Answer

This is the core principle of the CAPM. It suggests that the expected return of an investment should be proportional to its systematic risk (also known as beta), which measures how closely its returns are correlated with the overall market. Assets with higher beta should offer higher expected returns, while those with lower beta should offer lower expected returns.

The Capital Asset Pricing Model (Or CAPM) Hypothesizes That Assets