Reviewed by Thomas Brock Fact checked by Suzanne Kvilhaug CAPM: An Overview Many investors use the capital asset pricing model (CAPM) as a way to estimate the potential return of a stock or other ...

Let’s use the CAPM formula above to calculate the expected return (ER) of a stock over one year. Factoring these figures gives us an expected return of 16%. The market risk premium is (11 – 1. ...

The CAPM requires the following inputs ... Investors may use the beta of the stock found on most investment websites or calculate the beta manually by using the following regression model ...