<Dd> R f (\ displaystyle R_ (f)) is risk - free rate </Dd> <Dd> R P m (\ displaystyle RP_ (m)) is general market risk premium </Dd> <Dd> R P s (\ displaystyle RP_ (s)) is risk premium for small size </Dd> <Dd> R P u (\ displaystyle RP_ (u)) is risk premium due to company - specific risk factor" </Dd>

Assumptions regarding investor behavior are required by the capm