I know how to derive at the CAPM from a microeconomic foundation. In a recent University course I stumbled over a slide that derived the CAPM solely from the Sharpe ratio:


enter image description here

I cant come up with that steps by myself and it seems I am missing something down the line.

Do you guys here either have a source / video / etc. that derives the CAPM similarly in a step by step fashion? Or is someone here who could break the involved derivation steps into parts?

  • $\begingroup$ which course slides were the images taken from? $\endgroup$
    – develarist
    Oct 26, 2020 at 6:22

1 Answer 1


I imagine that after 3 years you don't need to maximize the shape ratio anymore, but I actually stumbled across the same question when studying for the exam and thus ended up at your post here, so here's my approach to deriving the CAPM equation. Maybe it'll help some other of Professor Lawrence's students in the future! https://imgur.com/oVsQPME

  • $\begingroup$ In case the link breaks, you should add your derivation to the post using MathJax. $\endgroup$
    – amdopt
    Jul 10 at 11:22

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