William Sharpe developed the Capital Asset Pricing Model with John Lintner and Jan Mossin.
The Capital Asset Pricing Model, commonly called CAPM, describes the relationship between an asset’s expected return and its exposure to market risk. It argues that investors should be compensated for the time value of money and for bearing systematic risk that cannot be eliminated through diversification.
Sharpe published his influential CAPM paper in 1964. Lintner and Mossin independently developed related versions during the same period. Sharpe later received the 1990 Nobel Memorial Prize in Economic Sciences for work on the theory of financial economics.
CAPM remains a foundational model in finance, although its assumptions are simplified. It assumes, among other things, that investors can borrow and lend at a common risk-free rate and that markets process information efficiently. Real markets do not always satisfy these conditions.