{"id":115,"date":"2011-08-06T13:35:57","date_gmt":"2011-08-06T06:35:57","guid":{"rendered":"https:\/\/mbabullshit.com\/blog\/?p=115"},"modified":"2017-09-14T12:12:00","modified_gmt":"2017-09-14T05:12:00","slug":"capm-capital-asset-pricing-model","status":"publish","type":"post","link":"https:\/\/mbabull.com\/blog\/2011\/08\/06\/capm-capital-asset-pricing-model\/","title":{"rendered":"CAPM Capital Asset Pricing Model in 3 minutes (YouTube Video Below)"},"content":{"rendered":"<h2>3 Minute Overview (Also Download Free Cheet Sheet at Bottom) and then scroll down for detailed calculations video<\/h2>\n<p><iframe loading=\"lazy\" src=\"https:\/\/www.youtube.com\/embed\/gzxKd2S2MdU\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<h2>Part 1<\/h2>\n<p><iframe loading=\"lazy\" src=\"http:\/\/www.youtube.com\/embed\/LWsEJYPSw0k\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<h2>Part 2<\/h2>\n<p><iframe loading=\"lazy\" src=\"http:\/\/www.youtube.com\/embed\/LH2BpIs1EF0\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<h2>Beta for CAPM Premium Video (Free Preview)<\/h2>\n<p><iframe loading=\"lazy\" src=\"https:\/\/www.youtube.com\/embed\/2JxU9cryUSg\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<h2>Beta Levered vs. Unlevered Premium Video (Free Preview)<\/h2>\n<p><iframe loading=\"lazy\" src=\"https:\/\/www.youtube.com\/embed\/CQZ5cbpYcg8\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<h2>Arbitrage Pricing Theory vs. CAPM Premium Video (Free Preview)<\/h2>\n<p><iframe loading=\"lazy\" src=\"https:\/\/www.youtube.com\/embed\/eo5J4Wi2j_U\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<h2>Arbitrage Pricing Theory and Idiosyncratic Risk Premium Video (Free Preview)<\/h2>\n<p><iframe loading=\"lazy\" src=\"https:\/\/www.youtube.com\/embed\/Wq-rhniEByc\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<h2>Arbitrage Pricing Theory and Portfolio Diversification Premium Video (Free Preview)<\/h2>\n<p><iframe loading=\"lazy\" src=\"https:\/\/www.youtube.com\/embed\/Iqev0F3k5Uc\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<h2>To Watch FULL Premium videos <span style=\"color: #0000ff;\"><a style=\"color: #0000ff;\" href=\"https:\/\/mbabullshit.com\/blog\/video-plan-170626\/\" target=\"_blank\">Click Here<\/a><\/span><\/h2>\n<p style=\"text-align: left;\">\u00a0<strong>Download FREE Cheat-Sheet PDF on <a title=\"CAPM Cheat Sheet\" href=\"https:\/\/mbabullshit.com\/blog\/wp-content\/uploads\/2013\/03\/CAPM-CheatSheet-Capital-Capital-Asset-Pricing-Model.pdf\" target=\"_blank\"><span style=\"font-size: 1.17em; line-height: 19px;\">CAPM<\/span> <span style=\"font-size: 1.17em; line-height: 19px;\">click\u00a0here<\/span><\/a><\/strong><\/p>\n<p>&nbsp;<\/p>\n<ul>\n<li>CAPM is just a \u201cmodel\u201d or formula used to calculate COST OF EQUITY<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li>Cost of Equity is how much an investor \u201cwants\u201d to earn for investing in a company which is more risky than a safe bank deposit (or government bond), and (usually) more risky than investing in the general stock market with a bunch of stocks.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li>It&#8217;s called a &#8220;cost&#8221; because that&#8217;s how much you should &#8220;fairly&#8221; pay your investors for investing in your risky company.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li>In more complicated problems, you include the cost of equity as part of your\u00a0<a href=\"https:\/\/mbabullshit.com\/blog\/2011\/08\/06\/wacc-weighted-average-cost-of-capital-how-to-calculate-wacc\/\">WACC<\/a>\u00a0or\u00a0<a href=\"https:\/\/mbabullshit.com\/blog\/2011\/08\/06\/wacc-weighted-average-cost-of-capital-how-to-calculate-wacc\/\">Weighted Average Cost of Capital<\/a><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li>CAPM assumes that investing in many stocks is safer than investing in just one company\u2019s stock: \u201cdon\u2019t put all your eggs in one basket\u201d sorta thing.. this is called \u201cdiversified\u201d risk<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li>Rationale: An investor would \u201cwant\u201d (or \u201cexpect\u201d) more income (\u201creturn\u201d) for investing in a highly risky company instead of the zero-risk \u00a0bank\/bond, and also instead of investing in a \u201cmedium-risk\u201d general stock market.\u00a0 Therefore, cost of equity = \u201cexpected return\u201d<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p>You calculate Cost of Equity using the CAPM or Capital Asset Pricing Model Formula:<\/p>\n<p align=\"center\">K<sub>e<\/sub>\u00a0= R<sub>f<\/sub>\u00a0+ B (R<sub>m<\/sub>-R<sub>f<\/sub>)<\/p>\n<p>DON\u2019T panic! It\u2019s MUCH\u00a0 EASIER than it looks! See this formula step-by-step in action, watch it for free in the video above.<\/p>\n<p><img decoding=\"async\" style=\"font-size: 13px; line-height: 19px;\" src=\"https:\/\/mbabullshit.com\/blog\/wp-content\/uploads\/2013\/02\/CAPM-e1362045923707.jpg\" alt=\"CAPM Capital Asset Pricing Model\" \/><\/p>\n","protected":false},"excerpt":{"rendered":"<p>3 Minute Overview (Also Download Free Cheet Sheet at Bottom) and then scroll down for detailed calculations video Part 1 Part 2 Beta for CAPM Premium Video (Free Preview) Beta Levered vs. Unlevered Premium Video (Free Preview) Arbitrage Pricing Theory vs. CAPM Premium Video (Free Preview) Arbitrage Pricing Theory and Idiosyncratic Risk Premium Video (Free [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[69,68,153,74,152,71],"class_list":["post-115","post","type-post","status-publish","format-standard","hentry","category-free-video-tutorials","tag-capital-asset-pricing-model","tag-capm","tag-capm-formula","tag-capm-model","tag-what-is-capital-asset-pricing-model","tag-what-is-capm"],"_links":{"self":[{"href":"https:\/\/mbabull.com\/blog\/wp-json\/wp\/v2\/posts\/115","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mbabull.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mbabull.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mbabull.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mbabull.com\/blog\/wp-json\/wp\/v2\/comments?post=115"}],"version-history":[{"count":37,"href":"https:\/\/mbabull.com\/blog\/wp-json\/wp\/v2\/posts\/115\/revisions"}],"predecessor-version":[{"id":5409,"href":"https:\/\/mbabull.com\/blog\/wp-json\/wp\/v2\/posts\/115\/revisions\/5409"}],"wp:attachment":[{"href":"https:\/\/mbabull.com\/blog\/wp-json\/wp\/v2\/media?parent=115"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mbabull.com\/blog\/wp-json\/wp\/v2\/categories?post=115"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mbabull.com\/blog\/wp-json\/wp\/v2\/tags?post=115"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}