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Treynor J. L. (1962), “Toward A Theory of Market Value of Risky Assets”, Rough Draft, Revised 12/28/02, with minor edits by Craig William French, pp.1-19.

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Article

Evolution of the CAPM: From “Premium for Risk” to “Sharp-Linter-Black Model”

1Department of Accounting and Finance, Faculty of Economics and Administrative Sciences, Bilecik Şeyh Edebali University, Turkey


Journal of Finance and Accounting. 2022, Vol. 10 No. 1, 1-6
DOI: 10.12691/jfa-10-1-1
Copyright © 2022 Science and Education Publishing

Cite this paper:
Huseyin Yilmaz. Evolution of the CAPM: From “Premium for Risk” to “Sharp-Linter-Black Model”. Journal of Finance and Accounting. 2022; 10(1):1-6. doi: 10.12691/jfa-10-1-1.

Correspondence to: Huseyin  Yilmaz, Department of Accounting and Finance, Faculty of Economics and Administrative Sciences, Bilecik Şeyh Edebali University, Turkey. Email: hyilmaz64@yahoo.com

Abstract

The evolution of the Capital Assets Pricing Model (CAPM) started with the Williams [1] with the formula of “Premium for Risk”. Then, Hicks [2] and Markowitz [3] gave some opinions about risk premium and the value of an individual financial asset, respectively. Then, Treynor [4] and [5] brought some contributions to the model such as risk premium for equity and present price of a share. Sharp [6] added to the model the expected rate of return and he also transferred the standard deviation from statistics to the CAPM evolution. Linther [7] gave another risk premium approach with a different formula. Mossin [8] continued to improve the CAPM with his contributions of expected rate of return on a unit of a risky asset, return of a unit of a riskless asset, and the risk margin formulas. Black [9] completed the CAPM evolution with his model called “Sharp Linther Black Model”.

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