INFORM CAPM INFORM
Price: AED 327
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Course details

No matter how much we diversify our investments, it's impossible to get rid of all the risk. As investors, we deserve a rate of return that compensates us for taking on risk. The capital asset pricing model (CAPM) helps us to calculate investment risk and what return on investment we should expect. Here we take a closer look at how it works.

Birth of a Model

The capital asset pricing model was the work of financial economist (and later, Nobel laureate in economics) William Sharpe, set out in his 1970 book "Portfolio Theory and Capital Markets." His model starts with the idea that individual investment contains two types of risk:

  • Systematic Risk - These are market risks that cannot be diversified away. Interest rates, recessions and wars are examples of systematic risks.
  • Unsystematic Risk - Also known as "specific risk," this risk is specific to individual stocks and can be diversified away as the investor increases the number of stocks in his or her portfolio. In more technical terms, it represents the component of a stock's return that is not correlated with general market moves.
Modern portfolio theory shows that specific risk can be removed through diversification. The trouble is that diversification still doesn't solve the problem of systematic risk; even a portfolio of all the shares in the stock market can't eliminate that risk. Therefore, when calculating a deserved return, systematic risk is what plagues investors most. CAPM, therefore, evolved as a way to measure this systematic risk.


Updated on 04 May, 2017

Job roles this course is suitable for:

Associate Project Manager, Sales Project/Program Manager, Service Asset Configuration Mgmt - Process Lead, Production/Marketing Coordinator

About INFORM

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INFORM واحدة من رواد فى مجال تكنولوجيا المعلومات تضم ‌فريق متميز لتقديم خدمات تكنولوجيا المعلومات, وحلول لتطوير انظمة الشركات والقيام بعمل انظمة خاصة متكاملة تسمح بزيادة كفاءة وسرعة الاتصال لتنسيق جميع الموارد والمعلومات 

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