The CAPM is the financial theory that creates a linear link between the necessary return on investment and risk. The CAPM models are a financial theory. The model is built on the link between the beta, the risk-free rate and the equity risk premium, or the projected return on the market less the risk-free rate.

CAPM is an easily computed and stressed return model. This model is frequently used.

He has been attacked for his ridiculous assumptions.

Despite these critiques, in many circumstances the CAPM delivers a beneficial result than the DDM or the WACC models.