Financial Information Analysis
The Capital Asset Pricing Model (CAPM) is a financial model that establishes a relationship between the expected return of an asset and its risk, specifically through its beta, which measures its volatility in relation to the market. This model helps investors understand the trade-off between risk and return, guiding them in making informed investment decisions. It plays a crucial role in determining the required rate of return on equity, which directly impacts shareholders' equity analysis and capital allocation strategies.
congrats on reading the definition of Capital Asset Pricing Model (CAPM). now let's actually learn it.