We call CAPM a “capital asset prici

We call CAPM a “capital asset pricing model” because, given a beta and an expected return for an asset, investors will bid its current price up or down, adjusting that expected return so that it satisfies formula [1]. Accordingly, the capital asset pricing model predicts the equilibrium price of an asset. This works because the model assumes that all investors agree on the beta and expected return of any asset. In practice, this assumption is unreasonable, so the capital asset pricing model is largely of theoretical value. It is the most famous example of an equilibrium pricing model.

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We call CAPM a "capital asset pricing model", because given a beta and an expected return for an asset investors will,, Bid its current price up, or down adjusting that expected return so that it satisfies formula []. Accordingly the 1, capital. Asset pricing model predicts the equilibrium price of an asset.This works because the model assumes that all investors agree on the beta and expected return of any asset. In, practice. This assumption, is unreasonable so the capital asset pricing model is largely of theoretical value. It is the most famous. Example of an equilibrium pricing model.