An Overview of Capital Market Theory

Principle purpose of this lecture is to present on Capital Market Theory. Here briefly focus on Capital asset pricing model. Capital asset pricing model (CAPM) is used to determine a theoretically appropriate required rate of return of an asset, if that asset is to be added to an already well-diversified portfolio, given that asset’s non-diversifiable risk. Capital market instruments used for market trade include stocks and bonds, treasury bills, foreign exchange, fixed deposits, debentures, etc.