CAPM (capital asset pricing model)
CAPM is the model that estimates the return a shareholder should demand from a stock. It starts from the return on a risk-free asset, usually the sovereign bond, and adds a premium proportional to that stock's market risk, measured by its beta. It is the standard way of working out the cost of equity that then feeds into the WACC.
Formula
Re = Rf + β · (Rm − Rf) See also
Where it is used
See it on real data
Celsmar computes this from the accounts companies file with their regulator, and shows which line every figure comes from. Free to start, no card.
Definition for informational purposes. It is not financial advice nor a recommendation to buy or sell.