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Asset Pricing Under a Subset of Linear Risk Tolerance Functions and Log-Normal Market Returns

Published online by Cambridge University Press:  06 April 2009

Jimmy E. Hilliard
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Extract

The Capital Asset Pricing Model (CAPM) developed and popularized by Treynor [27], Sharpe [26], Lintner [16], Mossin [19], and Fama [6] is of the form

where

E is the expected return at time t for firm i (conditional on information available at time t); the subscript m denotes the analogous market variable; rf is the risk-free rate; and . Black [2] has developed a similar form with expected returns from a zero beta portfolio, , assuming the role of the risk-free rate.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 15 , Issue 5 , December 1980 , pp. 1041 - 1061
Copyright
Copyright © School of Business Administration, University of Washington 1980

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References

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