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2020•World Scientific Book ChaptersRequires access

Asset Pricing Theories

Frank J. Fabozzi, Francesco A. Fabozzi

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Abstract

Asset pricing models, the subject of this chapter, describe the relationship between risk and expected return. When we refer to asset pricing models in this chapter, we mean the expected return investors require given the risk associated with an investment. The most well-known equilibrium pricing models are the capital asset pricing model (CAPM) developed in the 1960s and its subsequent extensions. We also describe the arbitrage pricing theory (APT), an asset pricing model developed in the mid-1970s.

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Asset pricing models, the subject of this chapter, describe the relationship between risk and expected return. When we refer to asset pricing models in this chapter, we mean the expected return investors require given the risk associated with an investment. The most well-known equilibrium pricing models are the capital asset pricing model (CAPM) developed in the 1960s and its subsequent extensions. We also describe the arbitrage pricing theory (APT), an asset pricing model developed in the mid-1970s.

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Available abstract

Asset pricing models, the subject of this chapter, describe the relationship between risk and expected return. When we refer to asset pricing models in this chapter, we mean the expected return investors require given the risk associated with an investment. The most well-known equilibrium pricing models are the capital asset pricing model (CAPM) developed in the 1960s and its subsequent extensions. We also describe the arbitrage pricing theory (APT), an asset pricing model developed in the mid-1970s.

Key concepts: Arbitrage pricing theory, Consumption-based capital asset pricing model, Capital asset pricing model, Investment theory, Rational pricing, Economics, Financial economics, Security market line

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