Although its application continues to spark vigorous debate, modern financial theory is now applied as a matter of course to investment management. And increasingly, problems in corporate finance are also benefiting from the same techniques. The response promises to be no less heated. CAPM, the capital asset pricing model, embodies the theory. For financial executives, the proliferation of CAPM applications raises these questions: What is CAPM? How can they use the model? Most important, does it work?
Read more on Financial crisis or related topics Pricing strategy, Risk management and Finance and investing
A version of this article appeared in theJanuary 1982issue of Harvard Business Review.
Read more on Financial crisis or related topics Pricing strategy, Risk management and Finance and investing
