The risk-free rate of return is an important building block ... Many of the most famous theories in finance, including the capital asset pricing model (CAPM), MPT, and the Black-Scholes model ...

Fact checked by Vikki Velasquez Reviewed by Somer Anderson When an individual or company embarks on an investment, they ...

Citations: Marshall, David. 1997. Comment on 'The CAPM Risk Adjustment for Exact Aggregation over Financial Assets. Macroeconomic Dynamics. (2)513-517.

Smart beta derives from the capital asset pricing model (CAPM), developed in an attempt to define the relationship between risk and return. As part of this model, beta is a measure of volatility ...

Fact checked by Suzanne Kvilhaug Reviewed by JeFreda R. Brown The risk-free rate of return is one of the most basic components of modern finance. The risk-free asset only applies in theory, but its ...

can force the rate of return to fluctuate and result in decreasing returns. For an investor, the goal is to invest in a risk-free instrument, which is explained through the risk-free rate of return.

SMB is one of the foundational components of the Fama-French model, which expands on the traditional Capital Asset Pricing Model (CAPM) by incorporating additional variables to better explain ...