The capital asset pricing model: a critical literature review

What is the relationship between the risk and expected return of an investment? The capital asset pricing model (CAPM) provides an initial framework for answering this question. The CAPM (Sharpe, 1964; Lintner, 1965) marks the birth of asset pricing theory. This model is based on the idea that not all risk should affect asset prices. The model thus provides insight into the kind of risk that is related to return. Four decades later, the CAPM is...