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Asset Pricing Theory

In: INTRODUCTION TO FINANCE Financial Management and Investment Management

Author

Listed:
  • Pamela P. Drake
  • Frank J. Fabozzi
  • Francesco A. Fabozzi

Abstract

Asset pricing theory seeks to describe the relationship between risk and expected return. Although we refer to asset pricing models in this chapter, what we mean is the expected return investors require given the risk associated with an investment. The two most well-known equilibrium asset pricing models are the capital asset pricing model (CAPM) and the arbitrage pricing theory (APT) model. In this chapter, we describe these two models.

Suggested Citation

  • Pamela P. Drake & Frank J. Fabozzi & Francesco A. Fabozzi, 2022. "Asset Pricing Theory," World Scientific Book Chapters, in: INTRODUCTION TO FINANCE Financial Management and Investment Management, chapter 19, pages 551-575, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789811241284_0019
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    More about this item

    Keywords

    Financial Management; Investment Management; Derivatives; Common Stock; Bonds; Company Analysis; Entrepreneurial Finance; Financial Instruments; Financial System; Financial Statements; Time Value of Money; Yields; Present Value; Future Value; Financial Strategy; Dividend Policy;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G3 - Financial Economics - - Corporate Finance and Governance
    • N2 - Economic History - - Financial Markets and Institutions
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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