PMM1008Principles of Finance and Investment- Capital Asset Pricing Model (CAPM)Introduction CAPM is based on Markowitzs portfolio theory and defines a linear relationship between the systematic risk of a security and its required rate of return.Originally developed individually by Sharpe, Mossin and Linter, this linear relationship is represented by the security market line (SML).Ri = Rf + i (Rm Rf)This states that the expected return of the risky investment equals the return from the risk-free
