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Theoretical Aspects Of Risk In Capm Theory

Author

Listed:
  • Nedelescu Mihai

    (Romanian American University)

  • Stănescu Maria Cristina

    (Romanian American University)

Abstract

Risk can be described as a combination between the probability of risk and the consequences in terms of loss or gain because of risk. Risk is an inherent part of all economic activities. The definition of risk (Passenheim, 2010) can be rather difficult as expectations are focused into the future and therefore there is no room for uncertainties. Additionally, these uncertainties could end in an outcome that is either more positive or more negative than expected. CAPM is used to illustrate a particular connection between the degree of uncertainty in earnings flow for a monetary investment as well as level of return, and as a result, it describes how shares are usually valued and how discount rates are established

Suggested Citation

  • Nedelescu Mihai & Stănescu Maria Cristina, 2015. "Theoretical Aspects Of Risk In Capm Theory," Romanian Economic Business Review, Romanian-American University, vol. 10(2), pages 60-70, June.
    • Handle: RePEc:rau:journl:v:10:y:2015:i:2:p:60-70
    as

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    File URL: http://www.rebe.rau.ro/RePEc/rau/journl/SU15/REBE-SU15-A5.pdf
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    References listed on IDEAS

    as
    1. Pascal Quiry & P. Vernimmen & Y. Le Fur & M. Dallocchio & A. Salvi, 2009. "Corporate Finance: Theory and Practice," Post-Print hal-00494902, HAL.
    2. ., 2007. "The Role of Law in Corporate Finance," Chapters, in: Law and Corporate Finance, chapter 1, Edward Elgar Publishing.
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