The Essential Financial Toolkit: Tool 5 - Required Returns and the CAPM
This note discusses the relationship between risk and return. It is obvious that investors would want a higher exposure to risk to be compensated with a higher return, but in order to estimate the actual return investors should require at different levels of risk, we need a model. The CAPM, one of the models most widely used in finance, provides a simple and intuitive way to tackle this issue.
Collection: IESE (España)
Ref: FN-559-E
Format: PDF
Number of pages: 10
Publication Date: Aug 27, 2009
Language: English, Spanish
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Description
This note discusses the relationship between risk and return. It is obvious that investors would want a higher exposure to risk to be compensated with a higher return, but in order to estimate the actual return investors should require at different levels of risk, we need a model. The CAPM, one of the models most widely used in finance, provides a simple and intuitive way to tackle this issue.
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