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

Huseyin Yilmaz^1,

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

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

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”.

Keywords:
the CAPM risk premium beta standard deviation variance covariance Williams Hicks Markowitz Sharp Linther Mossin Treynor Black

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References:

[1]	Williams, J.B. (1938), The Theory of Investment Value, North Holland Publishing Company, Amsterdam, Netherland.
[2]	Hicks, J.R (1939), Value and Capital, Oxford University Press, Second Edition, Great Britain.
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