{"id":8444,"date":"2020-12-15T13:45:19","date_gmt":"2020-12-15T13:45:19","guid":{"rendered":"https:\/\/analystprep.com\/blog\/?p=8444"},"modified":"2026-04-03T16:25:32","modified_gmt":"2026-04-03T16:25:32","slug":"beta-and-capm","status":"publish","type":"post","link":"https:\/\/analystprep.com\/blog\/beta-and-capm\/","title":{"rendered":"Beta and CAPM"},"content":{"rendered":"\n<div class=\"explainer-block\" style=\"background:#f9f9f9; border:1px solid #ddd; padding:20px; border-radius:10px; margin:20px 0;\">\n  <div id=\"ez-toc-container\" class=\"ez-toc-v2_0_80 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/analystprep.com\/blog\/beta-and-capm\/#Quick_Reference_CAPM_Beta_Formula\" >Quick Reference: CAPM Beta Formula<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/analystprep.com\/blog\/beta-and-capm\/#i\" >\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/analystprep.com\/blog\/beta-and-capm\/#Beta\" >Beta<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/analystprep.com\/blog\/beta-and-capm\/#Interpreting_Beta\" >Interpreting Beta<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/analystprep.com\/blog\/beta-and-capm\/#Beta_is_essentially_a_multiplier\" >Beta is essentially a multiplier<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/analystprep.com\/blog\/beta-and-capm\/#Example_1_Calculating_Beta\" >Example 1: Calculating Beta<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/analystprep.com\/blog\/beta-and-capm\/#Solution\" >Solution<\/a><\/li><\/ul><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/analystprep.com\/blog\/beta-and-capm\/#The_Capital_Asset_Pricing_Model_CAPM\" >The Capital Asset Pricing Model (CAPM)<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/analystprep.com\/blog\/beta-and-capm\/#Application_of_CAPM\" >Application of CAPM<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/analystprep.com\/blog\/beta-and-capm\/#Example_2_CAPM_Application\" >Example 2: CAPM Application<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/analystprep.com\/blog\/beta-and-capm\/#Solution-2\" >Solution<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 style=\"margin-top:0;\"><span class=\"ez-toc-section\" id=\"Quick_Reference_CAPM_Beta_Formula\"><\/span>Quick Reference: CAPM Beta Formula<span class=\"ez-toc-section-end\"><\/span><\/h2>\n  \n  <p><strong>Formula:<\/strong><\/p>\n  $$\n\\beta = \\frac{\\text{Cov}\\left(\\text{R}_{\\text{i}}, \\text{R}_{\\text{m}}\\right)}{\\text{Var}\\left(\\text{R}_{\\text{m}}\\right)}\n$$\n  \n $$\\begin{array}{c|l}\n\\textbf{Term} &#038; \\textbf{Meaning} \\\\\n\\hline\n\\text{R}_{\\text{i}} &#038; \\text{Return of individual asset} \\\\\n\\hline\n\\text{R}_{\\text{m}} &#038; \\text{Return of the market portfolio} \\\\\n\\hline\n\\text{Cov}\\left(\\text{R}_{\\text{i}}, \\text{R}_{\\text{m}}\\right) &#038; \\text{Covariance between asset and market returns} \\\\\n\\hline\n\\text{Var}\\left(\\text{R}_{\\text{m}}\\right) &#038; \\text{Variance of market returns} \\\\\n\\end{array}$$\n\n\n  <p><strong>Interpretation:<\/strong>  \n  A beta of 1 = moves with the market.  \n  Less than 1 = less volatile.  \n  More than 1 = more volatile.<\/p>\n\n  <a href=\"#example-calculation\" style=\"display:inline-block; background:#0073e6; color:#fff; padding:10px 20px; border-radius:6px; text-decoration:none;\">\ud83d\udd22 See CAPM Beta Calculator Below<\/a>\n<\/div>\n\n\n\n<div class=\"wp-block-group is-vertical is-layout-flex wp-container-core-group-is-layout-8cf370e7 wp-block-group-is-layout-flex\">\n<div style=\"width: 640px;\" class=\"wp-video\"><video class=\"wp-video-shortcode\" id=\"video-8444-1\" width=\"640\" height=\"360\" preload=\"metadata\" controls=\"controls\"><source type=\"video\/youtube\" src=\"https:\/\/www.youtube.com\/watch?v=ddEfpS02kOE&#038;&#038;_=1\" \/><a href=\"https:\/\/www.youtube.com\/watch?v=ddEfpS02kOE&#038;\">https:\/\/www.youtube.com\/watch?v=ddEfpS02kOE&#038;<\/a><\/video><\/div>\n<h2><span class=\"ez-toc-section\" id=\"i\"><\/span>\u00a0<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Understanding how beta works is crucial if you want to calculate expected returns and manage portfolio risk effectively. In this guide, we\u2019ll break down the CAPM beta formula, how to interpret beta values (including the beta of a risk-free asset), and walk through examples so you can confidently use these concepts in the exam and beyond. Whether you&#8217;re preparing for CFA\u00ae Level 1 or brushing up for finance interviews, this article gives you everything you need to grasp beta and the Capital Asset Pricing Model (CAPM)\u2014fast.<\/p>\n<div style=\"width:100%; margin:30px 0; box-sizing:border-box;\">\n  <a href=\"https:\/\/analystprep.com\/free-trial\/\" target=\"_blank\" rel=\"noopener noreferrer\"\n     style=\"display:block;\n            width:100%;\n            max-width:100%;\n            box-sizing:border-box;\n            padding:16px 20px;\n            border:2px solid #2f6fed;\n            border-radius:999px;\n            background:#f2f4f8;\n            color:#2f6fed;\n            font-size:16px;\n            font-weight:500;\n            text-decoration:none;\n            text-align:center;\n            line-height:1.2;\">\n    Access our free trial to practice CAPM and beta concepts\n  <\/a>\n<\/div>\n<h2><span class=\"ez-toc-section\" id=\"Beta\"><\/span>Beta<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Beta is a measure of systematic risk, which refers to the risk inherent to the entire financial market. This is the risk that you cannot get rid of by diversifying across different securities.<\/p>\n<p>A common misconception is that Beta is <em><strong><u>NOT<\/u><\/strong><\/em> the degree of correlation between security and the market; however, in the true sense, the Beta calculation uses the correlation between the security and the market.<\/p>\n<p>The Beta formulae for company <em>i <\/em>is the following:<\/p>\n<p>$$\\beta_i=\\frac{Cov(i,m)}{\\sigma^2_m}=\\frac{\\sigma_{im}}{\\sigma^2_m}$$<\/p>\n<p>Where:<\/p>\n<p>\\(\\sigma^2_m\\) = the variance of the market index; and<\/p>\n<p>\\(\\sigma_{im}\\) = the covariance between the individual stock&#8217;s\/asset&#8217;s return and that of the market;<\/p>\n<p>Alternatively, by using the fact that:<\/p>\n<p>$${\\text{Cov}(i,m)} = \\rho_{im}\\sigma_i\\sigma_m$$<\/p>\n<p>We can write beta as:<\/p>\n<p>$${\\beta_i} = \\rho_{im}\\times\\frac{\\sigma_i}{\\sigma_m}$$<\/p>\n<p>Where:<\/p>\n<p>\\(\\rho_{im}\\) = the correlation coefficient between returns of asset <em>i <\/em> and that of the market portfolio; and<\/p>\n<p>\\(\\sigma_i\\) = the standard deviation of asset <em>i<\/em>.<\/p>\n\n<h3><span class=\"ez-toc-section\" id=\"Interpreting_Beta\"><\/span>Interpreting Beta<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>A <em>positive<\/em> Beta indicates the asset moves in the same direction as the market, whereas a <em>negative<\/em> Beta would indicate the opposite.<\/p>\n<p>The Beta of a risk-free asset is <em>zero<\/em> because the risk-free asset&#8217;s covariance and the market are zero. By definition, the Beta of the market is one, and most developed market stocks exhibit high positive betas.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Beta_is_essentially_a_multiplier\"><\/span>Beta is essentially a multiplier<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>A value of Beta\u00a0above 1 indicates a stock\/asset\/portfolio that has, historically, amplified the return of the whole market (positive or negative).<\/li>\n<li>A beta close to zero would indicate a stock\/asset\/portfolio that provides a more stable return than the market as a whole.<\/li>\n<li>A negative beta would signify a stock\/asset\/portfolio whose performance is counter-cyclical, i.e., offsets the overall market experience.<\/li>\n<\/ul>\n<h4><span class=\"ez-toc-section\" id=\"Example_1_Calculating_Beta\"><\/span>Example 1: Calculating Beta<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p>The correlation between an asset and the market is 0.6, the asset&#8217;s standard deviation is 18%, and the standard deviation of the market is 14%.<\/p>\n<p>What is the Beta of the asset?<\/p>\n<p>A. 0.77<\/p>\n<p>B. 0.47<\/p>\n<p>C. 0.99<\/p>\n<h4><span class=\"ez-toc-section\" id=\"Solution\"><\/span>Solution<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p>The correct answer is <strong>A<\/strong>.<\/p>\n<p>We know that:<\/p>\n<p>$$\\begin{align*}{\\beta_i}=&amp;\\rho_{im}\\times\\frac{\\sigma_i}{\\sigma_m}\\end{align*}$$<\/p>\n<p>Thus,<\/p>\n<p>$$\\begin{align*}{\\beta_i}&amp;=\\frac{0.6\\times0.18}{0.14}\\\\&amp;=0.77\\end{align*}$$<\/p>\n<h2><span class=\"ez-toc-section\" id=\"The_Capital_Asset_Pricing_Model_CAPM\"><\/span>The Capital Asset Pricing Model (CAPM)<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The Capital Asset Pricing Model (CAPM) provides a linear relationship between the expected return for an asset and the Beta.<\/p>\n<p><em>Assumptions of the CAPM model include:<\/em><\/p>\n<ul>\n<li>There are no transaction costs;<\/li>\n<li>There are no taxes;<\/li>\n<li>Assets are infinitely divisible;<\/li>\n<li>Unlimited short-selling is permissible;<\/li>\n<li>All assets are marketable\/liquid;<\/li>\n<li>Investors are price takers whose individual buy and sell transactions do not affect the price;<\/li>\n<li>Investors&#8217; utility functions are based solely on expected portfolio return and risk; and<\/li>\n<li>The only concern among investors is risk and return over a single period, and the single period is the same for all investors.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Application_of_CAPM\"><\/span>Application of CAPM<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The application of the Capital Asset Pricing Model (CAPM) to compute the cost of equity is based on the following relationship:<\/p>\n<p>$${E(R_i)}=R_f+\\beta_i[E(R_m)-R_f]$$<\/p>\n<p>Where:<\/p>\n<p>\\(E(R_i)\\) = the\u00a0cost of equity or the expected return on a stock;<\/p>\n<p>\\(R_f\\) = the risk-free rate of interest (this may be estimated by the yield on a default-free government debt instrument);<\/p>\n<p>\\(\\beta_i\\) = the equity beta or return sensitivity of stock\u00a0<em>i\u00a0<\/em>to changes in the market return; and<\/p>\n<p>\\(E(R_m)\\) = the expected market return.<\/p>\n<p><em>Note:\u00a0<\/em>The expression \\(E(R_m)-(R_f)\\) is the expected market risk premium or equity risk premium<\/p>\n<h4><span class=\"ez-toc-section\" id=\"Example_2_CAPM_Application\"><\/span>Example 2: CAPM Application<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p>You have been provided the following:<\/p>\n<ul>\n<li>Risk-free rate = 5%<\/li>\n<li>Standard deviation of the security = 40%<\/li>\n<li>Security correlation with market = 0.80<\/li>\n<li>Standard deviation of the market = 20%<\/li>\n<li>Expected market return = 10%<\/li>\n<\/ul>\n<p>Calculate the expected return for this security.<\/p>\n<p>A. 12%<\/p>\n<p>B. 13%<\/p>\n<p>C. 21%<\/p>\n<h4><span class=\"ez-toc-section\" id=\"Solution-2\"><\/span>Solution<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p>The correct answer is\u00a0<strong>B<\/strong>.<\/p>\n<p>First, find Beta:<\/p>\n<p>$$\\begin{align*}{\\beta_i}=&amp;\\rho_{im}\\times\\frac{\\sigma_i}{\\sigma_m}\\\\=&amp;\\frac{0.80\\times0.40}{0.20}\\\\=&amp;1.6\\end{align*}$$<\/p>\n<p>Next, use the CAPM model to find the expected return:<\/p>\n<p>$$\\begin{align*}{E(R_i)}=&amp;R_f+\\beta_i[E(R_m)-R_f]\\\\=&amp;{5\\%}+{1.6(10\\%-5\\%)}\\\\=&amp;13\\%\\end{align*}$$<\/p>\n<p><blockquote class=\"wp-embedded-content\" data-secret=\"28dv4SGt9Y\"><a href=\"https:\/\/analystprep.com\/shop\/frm-part-1-and-part-2-complete-course-by-analystprep\/\">FRM Part 1 and Part 2 Complete Online Course<\/a><\/blockquote><iframe loading=\"lazy\" class=\"wp-embedded-content\" sandbox=\"allow-scripts\" security=\"restricted\" style=\"position: absolute; visibility: hidden;\" title=\"&#8220;FRM Part 1 and Part 2 Complete Online Course&#8221; &#8212; AnalystPrep\" src=\"https:\/\/analystprep.com\/shop\/frm-part-1-and-part-2-complete-course-by-analystprep\/embed\/#?secret=VAeHiRyIih#?secret=28dv4SGt9Y\" data-secret=\"28dv4SGt9Y\" width=\"600\" height=\"338\" frameborder=\"0\" marginwidth=\"0\" marginheight=\"0\" scrolling=\"no\"><\/iframe><\/p>\n<\/div>\n\n\n\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"FAQPage\",\n  \"mainEntity\": [\n    {\n      \"@type\": \"Question\",\n      \"name\": \"What is beta in CAPM?\",\n      \"acceptedAnswer\": {\n        \"@type\": \"Answer\",\n        \"text\": \"In the Capital Asset Pricing Model (CAPM), beta measures an asset\u2019s sensitivity to movements in the overall market. A higher beta indicates higher volatility relative to the market.\"\n      }\n    },\n    {\n      \"@type\": \"Question\",\n      \"name\": \"What is the beta of a risk-free asset?\",\n      \"acceptedAnswer\": {\n        \"@type\": \"Answer\",\n        \"text\": \"The beta of a risk-free asset is zero. Since risk-free assets are unaffected by market fluctuations, they have no sensitivity to market movements.\"\n      }\n    },\n    {\n      \"@type\": \"Question\",\n      \"name\": \"How to calculate CAPM beta?\",\n      \"acceptedAnswer\": {\n        \"@type\": \"Answer\",\n        \"text\": \"CAPM beta is calculated using the formula: \u03b2 = Cov(Ri, Rm) \/ Var(Rm), where Ri is the return of the asset and Rm is the return of the market.\"\n      }\n    },\n    {\n      \"@type\": \"Question\",\n      \"name\": \"What does a beta of 1.3 mean?\",\n      \"acceptedAnswer\": {\n        \"@type\": \"Answer\",\n        \"text\": \"A beta of 1.3 means the asset is 30% more volatile than the market. If the market rises by 10%, the asset is expected to rise by 13%, and vice versa.\"\n      }\n    },\n    {\n      \"@type\": \"Question\",\n      \"name\": \"What is the CAPM beta formula?\",\n      \"acceptedAnswer\": {\n        \"@type\": \"Answer\",\n        \"text\": \"The CAPM beta formula is: \u03b2 = Covariance of asset and market returns divided by the variance of market returns, or \u03b2 = Cov(Ri, Rm) \/ Var(Rm).\"\n      }\n    }\n  ]\n}\n<\/script>\n\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"QAPage\",\n  \"mainEntity\": {\n    \"@type\": \"Question\",\n    \"name\": \"Example 1: Calculating Beta\",\n    \"text\": \"The correlation between an asset and the market is 0.6, the asset\u2019s standard deviation is 18%, and the standard deviation of the market is 14%. What is the beta of the asset?\\n\\nA. 0.77\\nB. 0.47\\nC. 0.99\",\n    \"answerCount\": 1,\n    \"upvoteCount\": 0,\n    \"dateCreated\": \"2020-12-15T00:00:00+00:00\",\n    \"author\": {\n      \"@type\": \"Organization\",\n      \"name\": \"AnalystPrep\"\n    },\n    \"acceptedAnswer\": {\n      \"@type\": \"Answer\",\n      \"text\": \"The correct answer is A. Using \u03b2 = \u03c1im \u00d7 (\u03c3i \/ \u03c3m), we get \u03b2 = 0.6 \u00d7 (0.18 \/ 0.14) \u2248 0.77, so the asset\u2019s beta is 0.77.\",\n      \"dateCreated\": \"2020-12-15T00:00:00+00:00\",\n      \"upvoteCount\": 0,\n      \"url\": \"https:\/\/analystprep.com\/blog\/beta-and-capm\/#example-1-calculating-beta\",\n      \"author\": {\n        \"@type\": \"Organization\",\n        \"name\": \"AnalystPrep\"\n      }\n    }\n  }\n}\n<\/script>\n\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"QAPage\",\n  \"mainEntity\": {\n    \"@type\": \"Question\",\n    \"name\": \"Example 2: CAPM Application\",\n    \"text\": \"You have been provided the following data:\\n\u2022 Risk-free rate = 5%\\n\u2022 Standard deviation of the security = 40%\\n\u2022 Security correlation with market = 0.80\\n\u2022 Standard deviation of the market = 20%\\n\u2022 Expected market return = 10%\\n\\nCalculate the expected return for this security.\\n\\nA. 12%\\nB. 13%\\nC. 21%\",\n    \"answerCount\": 1,\n    \"upvoteCount\": 0,\n    \"dateCreated\": \"2020-12-15T00:00:00+00:00\",\n    \"author\": {\n      \"@type\": \"Organization\",\n      \"name\": \"AnalystPrep\"\n    },\n    \"acceptedAnswer\": {\n      \"@type\": \"Answer\",\n      \"text\": \"The correct answer is B. First compute \u03b2 = \u03c1im \u00d7 (\u03c3i \/ \u03c3m) = 0.80 \u00d7 (0.40 \/ 0.20) = 1.6. Then apply CAPM: E(Ri) = Rf + \u03b2[E(Rm) \u2212 Rf] = 5% + 1.6(10% \u2212 5%) = 13%.\",\n      \"dateCreated\": \"2020-12-15T00:00:00+00:00\",\n      \"upvoteCount\": 0,\n      \"url\": \"https:\/\/analystprep.com\/blog\/beta-and-capm\/#example-2-capm-application\",\n      \"author\": {\n        \"@type\": \"Organization\",\n        \"name\": \"AnalystPrep\"\n      }\n    }\n  }\n}\n<\/script>\n\n\n\n<div style=\"text-align:center; margin:32px 0 10px;\">\n\n<a href=\"https:\/\/analystprep.com\/free-trial\/\" target=\"_blank\" rel=\"noopener noreferrer\" style=\"display:inline-flex; align-items:center; justify-content:center; padding:12px 24px; border-radius:9999px; background:#1e5bd8; color:#ffffff; font-weight:700; text-decoration:none;\">\nStart Free Trial \u2192\n<\/a>\n\n<p style=\"margin-top:12px; font-size:16px; line-height:1.5;\">\nStrengthen your understanding of beta, systematic risk, and the CAPM framework by solving CFA exam-style questions and practical portfolio analysis problems.\n<\/p>\n\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Quick Reference: CAPM Beta Formula Formula: $$ \\beta = \\frac{\\text{Cov}\\left(\\text{R}_{\\text{i}}, \\text{R}_{\\text{m}}\\right)}{\\text{Var}\\left(\\text{R}_{\\text{m}}\\right)} $$ $$\\begin{array}{c|l} \\textbf{Term} &#038; \\textbf{Meaning} \\\\ \\hline \\text{R}_{\\text{i}} &#038; \\text{Return of individual asset} \\\\ \\hline \\text{R}_{\\text{m}} &#038; \\text{Return of the market portfolio} \\\\ \\hline \\text{Cov}\\left(\\text{R}_{\\text{i}}, \\text{R}_{\\text{m}}\\right) &#038; \\text{Covariance between&#8230;<\/p>\n","protected":false},"author":4,"featured_media":8563,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[70,71],"tags":[87,88,78,83],"class_list":["post-8444","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-cfa","category-frm","tag-beta","tag-capm","tag-cfa","tag-frm","blog-post","animate"],"acf":[],"post_mailing_queue_ids":[],"_links":{"self":[{"href":"https:\/\/analystprep.com\/blog\/wp-json\/wp\/v2\/posts\/8444","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/analystprep.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/analystprep.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/analystprep.com\/blog\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/analystprep.com\/blog\/wp-json\/wp\/v2\/comments?post=8444"}],"version-history":[{"count":60,"href":"https:\/\/analystprep.com\/blog\/wp-json\/wp\/v2\/posts\/8444\/revisions"}],"predecessor-version":[{"id":14393,"href":"https:\/\/analystprep.com\/blog\/wp-json\/wp\/v2\/posts\/8444\/revisions\/14393"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/analystprep.com\/blog\/wp-json\/wp\/v2\/media\/8563"}],"wp:attachment":[{"href":"https:\/\/analystprep.com\/blog\/wp-json\/wp\/v2\/media?parent=8444"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/analystprep.com\/blog\/wp-json\/wp\/v2\/categories?post=8444"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/analystprep.com\/blog\/wp-json\/wp\/v2\/tags?post=8444"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}