Capital Asset Prices

Sharpe, W. F. (1964). Capital Asset Prices: A Theory of Market Equilibrium under Conditions of Risk. Journal of Finance, 19(3), 425-442.

Type

Journal article

Intellectual base

Primary research

Year

1964

DOI

10.1111/j.1540-6261.1964.tb02865.x

Link

https://doi.org/10.1111/j.1540-6261.1964.tb02865.x

Cited from

economics_finance, information_theory, operations_research, philosophy

Cited by

6 citations across 6 artifacts.

Each citation links to the sentence it supports in the citing article.

Primes

• Balance
  • … by institutionalizing countervailing powers. Management and organizational design: Balance in portfolio theory, resource allocation, product mix, and workload distribution; Markowitz's mean-variance optimization (1952) codified portfolio balance as the allocation problem of balancing expected return against risk.

    This sourceDerives the Capital Asset Pricing Model (CAPM), relating an asset's expected return to its systematic risk (beta) in market equilibrium. Cited inline (tier B) in the Applied example ('Modern extensions — Sharpe ratio 1964 …')

• Discounting (Present Value)
  • Sharpe (1964)

    This sourceDerives the Capital Asset Pricing Model (CAPM); links expected return to systematic risk (beta); supports the claim that Sharpe developed frameworks for calculating risk-adjusted discount rates.

• Multiobjective Optimization
  • These two objectives are in tension (higher expected return is generally associated with higher variance), and the Pareto frontier — which Markowitz named the efficient frontier — is the set of portfolios for which no other portfolio offers both higher expected return and lower variance, a frontier that Sharpe (1964) subsequently extended into the Capital Asset Pricing Model.

    This sourceDerives Capital Asset Pricing Model (CAPM); establishes linear relationship between expected return and systematic risk (beta); foundational for equilibrium asset-pricing theory.

• Risk
  • The Sharpe (1964) capital asset pricing model rests on treating an asset's contribution to portfolio risk as the priced quantity, distinguishing diversifiable from systematic exposure.

    This sourceDerives Capital Asset Pricing Model (CAPM); establishes linear relationship between expected return and systematic risk (beta); foundational for equilibrium asset-pricing theory.

• Risk–Return Tradeoff
  • Portfolio Selection: Efficient Diversification of Investments, 1959 — Nobel Prize 1990), the Capital Asset Pricing Model (William Sharpe,

    This sourceDerives Capital Asset Pricing Model (CAPM); establishes linear relationship between expected return and systematic risk (beta); foundational for equilibrium asset-pricing theory.

Domain-specific

• Treynor Ratio
  • That makes the ratio meaningful inside a diversified-investor/CAPM-style frame in which idiosyncratic risk can be diversified away and systematic risk is the relevant priced exposure.

Verification

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