The capital asset pricing model is a forecasting model based on the expected return equilibrium of risky assets, which shows the reasonable risk premium of a single security and depends on the contribution of the risk of a single security to the risk of investors' entire portfolio.
Second, the application premise of capital asset pricing model
Although the capital asset pricing model is an effective risk asset price forecasting model in the capital market, and it is simple and clear, it has always been concerned and used by people. However, the strict and excessive assumptions of the model affect its applicability. The core of its basic assumption is that the securities market is an efficient market, which is the application premise of this model.
In investment practice, investors all pursue profit maximization and excess return higher than average return, but in theory, investors have equal opportunities to obtain information. If investors are rational, no investors can get excess returns. Accordingly, we can think that the market at this time is an "efficient market". It can be seen that the effectiveness of the market is a sign to measure whether the market is mature or not.
In an effective market, any new information will be quickly and fully reflected in the price, that is, with new information, the price will change. Price changes can be positive or negative, and fluctuate randomly around intrinsic value. In a completely efficient market, price changes are almost blind. Investors usually can only get ordinary profits, but can't get excess profits. It is very difficult to get unusual profits by buying and selling securities. Because when investors seek to take advantage of the opportunities brought by temporary inefficiency, they also weaken the degree of inefficiency. Therefore, it is almost impossible for people with poor alertness and poor information to make unusual profits.
According to the different information reflected by the market price, the efficient market can be divided into weak efficient market, semi-strong efficient market and strong efficient market. In the weak efficient market, the real stock price is a simple advance of the past stock price, showing random characteristics. Investors can't get excess profits through statistical analysis of stock price and its trading volume; In the semi-strong efficient market, the realistic stock price reflects all publicly available information, including not only the company's historical information, business operations and financial reports, but also related macroeconomic and other publicly available information. It is impossible for investors to obtain excess profits through the analysis of public information; In a strong efficient market, the current stock price fully reflects all the public information and undisclosed internal information in history. Therefore, investors cannot obtain excess profits by obtaining internal information. For investors, any historical information and internal information are worthless. All investors in the market are highly responsive to the acquisition of information, and the stock price will be adjusted in time because of all investors' responses to information. When trading according to internal information, it is impossible for any investor to obtain excess profits through the lagging reflection of information by other investors. Empirical research shows that the securities market generally conforms to the semi-strong efficient market hypothesis. Therefore, it is generally believed that efficient market refers to semi-strong efficient.
Third, the significance and value of the model
Capital asset pricing model is the cornerstone of modern finance, which reveals the basic operating rules of capital market and is of great significance to market practice and theoretical research. It is not only widely used to determine the prices of various assets in the capital market, for example, how to price the issuance of securities in the primary market; At the same time, it also provides investors with a mechanism to choose several competitive financial assets according to the systemic risk of assets. Specifically, investors can determine the expected rate of return of market portfolio through the authoritative comprehensive index, and calculate the β coefficient of a single asset for investors to choose. At the same time, the risk-free rate of return can be determined by treasury bills or other appropriate government bonds. When investors get this information, the capital asset pricing model provides investors with a method to estimate the return rate of potential investment projects. When the expected rate of return of an asset is higher than the necessary rate of return required by investors, buying this asset is the most suitable investment choice. In this way, the capital asset pricing model has been widely used in the real market.