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Published in:
2011 | OriginalPaper | Chapter
Required Returns and the CAPM
Author : Javier Estrada
Published in: The Essential Financial Toolkit
Publisher: Palgrave Macmillan UK
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This chapter discusses the relationship between risk and return. It is obvious that investors would want a higher exposure to risk to be compensated with a higher return, but in order to estimate the actual return investors should require at different levels of risk, we need a model. The Capital Asset Pricing Model (CAPM), one of the models most widely used in finance, provides a simple and intuitive way to tackle this issue.