Sharpe – Lintner’s model Capital Asset Pricing Model - CAPM

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Sharpe – Lintner’s model Capital Asset Pricing Model - CAPM

Assumptions

Market portfolio

Market portfolio It follows that market portfolio consists of all risky assets on the market. All shares appear in it with positive proportions, according their market value. Real market portfolio? Usually, market indices are taken as market portfolios surrogates.

Risk free asset

Combination of the market portfolio and risk free asset

Capital Market Line - CML

Capital Market Line - CML

Security Market Line - SML and Beta

SML – Security Market Line

Beta

Beta

Portfolio’s Beta

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