Many investors use the capital asset pricing model (CAPM) as a way to estimate the potential return of a stock or other asset within the context of its intrinsic risk. Used primarily to analyze ...

For simplicity, assume no inflation. Basically, the real yield on long-term treasuries is Rf. The expected return on equities is ERi, which is the risk-free rate plus the premium investors demand in ...

The two main formulas for determining the cost of equity are the capital asset pricing model (CAPM) and dividend discount model (DDM). Each formula serves a different purpose, with CAPM being the ...

Merton, Robert C. "A Reexamination of the Capital Asset Pricing Model." In Studies in Risk and Return, edited by J. Bicksler and I. Friend. Cambridge, MA: Ballinger Publishing Company, 1977.