Evolution of the CAPM: From “Premium for Risk” to “Sharp-Linter-Black Model”

The evolution of the Capital Assets Pricing Model (CAPM) started with the Williams [1] with the formula of “Premium for Risk”. Then, Hicks [2] and Markowitz [3] gave some opinions about risk premium and the value of an individual financial asset, respectively. Then, Treynor [4] and [5] brought some contributions to the model such as risk premium for equity and present price of a share. Sharp [6] added to the model the expected rate of return and he also transferred the standard deviation from statistics to the CAPM evolution. Linther [7] gave another risk premium approach with a different formula. Mossin [8] continued to improve the CAPM with his contributions of expected rate of return on a unit of a risky asset, return of a unit of a riskless asset, and the risk margin formulas. Black [9] completed the CAPM evolution with his model called “Sharp Linther Black Model”.