Vol. 9, Issue 7, Part D (2023)

Abstract
CAPM is widely used in applications, such as estimating the cost of capital for firms and evaluating the performance of managed portfolios. It offers powerful predictions about how to measure risk and the relation between expected return and risk. It also point out some of the assumptions underlying the CAPM which must be satisfied if it is to be used for calculating expected return from securities of equivalent risk. This paper critically examines the advantages and disadvantages of this model. The data for this study has been taken from secondary sources, such as books and websites. This paper concluded that this model is highly useful in prediction of risk and return relationship of securities.