Canonical · Finance Theory · Paper
The Capital Asset Pricing Model (CAPM)
William Sharpe · 1964
"CAPM isolates the price of systematic risk — expected return rises linearly with beta to the market, so only non-diversifiable risk earns a premium and alpha is excess over that line."
Sharpe asked in 1964: why do some assets reliably earn more than others, and some never do? His answer was a single line — expected return = risk-free rate + beta × market premium — that still anchors every DCF and hurdle rate.
Read more about the topic
Up NextSuggested: Continues the theme of Finance Theory
The Efficient Market Hypothesis
"Fama formalized that in an efficient market, prices already reflect all available information of that form — weak, semi-strong, or strong — so consistently beating the market requires either private information or a risk premium, not just public analysis."
Eugene Fama · PaperContinue→