Why CAPM was named CAPM?

I remember asking this question to my friends. Now Sharpe answers this in his superb interview with AFA:

Q. Continuing with our CAPM trivia quiz, over the years some of my students have wondered if the C and A are redundant.  I told them it wouldn’t have made nearly as nice of a title if we called it the AP-M.  We need the C in there. (Laugh)  But what inspired you to call it “Capital Asset Pricing”, and did you mean to communicate anything other than just asset pricing?

A.        That’s an interesting question.  I don’t know  the answer.  I wasn’t thinking about acronyms.  I think I was trying to connote the fact that we are talking about assets in capital markets.  Whereas with assets, perhaps I was thinking, you would think of cars and trucks.

Q.        So traded assets?

A.        Yes   Securities, perhaps.

 

So, that is how we have the name- CAPM, one of the most profound ideas of portfolio theory.  

 

Sharpe has a super sense of humor as well (though Avinash Dixit takes the cake when it comes to humor):

 

Q.        Well, I am glad that you [settled on capital assets]… because the buzz word is, CAP-M.   With securities, it would be SAP-M, or something. A.        Yes,            or SPAM, I’m not sure what it would have been.

🙂

 

This is a superb interview form the great mind. It tells you how the main idea came into being (Markowitz got it from a broker), how difficult it was to get the main ideas in finance across to economists, etc.

 

Highly recommended reading.

One Response to “Why CAPM was named CAPM?”

  1. Financial Md » Why CAPM was named CAPM? Says:

    […] Original post by Mostly Economics […]

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