CAPM Formula CAPM is one component of the efficient market hypothesis, which states that the current prices of assets in a financial market always reflect all of the information available to ...

The Capital Asset Pricing Model (CAPM) and the Arbitrage Pricing Theory (APT) help project the expected rate of return relative to risk, but they consider different variables.

CAPM can be used to help you build a portfolio of stocks that have the potential for the reward you seek given the level of risk you can accept. CAPM is most often used to evaluate riskier stocks.