Describe CAPM and how it can be used to to manage portfolio risk...? How is CAPM used...

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Finance

Describe CAPM and how it can be used to to manage portfoliorisk...?
How is CAPM used by investors to manage portfolio risk as wellas how they can create portfolios tailored to the investors exactrisk tolerance level..?
Include Sources... Base answers upon the work of Markowitz andSharpe/Litner..

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Capital Asset Pricing Model As per CAPM model Risk management is more important than return management Risk may be of loss of return or loss of main investment made Investment can be made in a single security or in a portfolio Both have different risk In portfolio risk further can be divided in two parts ie systematic risk and unsystematic risk Systematic risk is related with market and measured as Beta Lower See Answer

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Describe CAPM and how it can be used to to manage portfoliorisk...?How is CAPM used by investors to manage portfolio risk as wellas how they can create portfolios tailored to the investors exactrisk tolerance level..?Include Sources... Base answers upon the work of Markowitz andSharpe/Litner..