Finance School of management Introduction CAPM is a theory about equilibrium prices in the markets for risky assets It is important because it provides a justification for the widespread practice of passive investing called indexing a way to estimate expected rates of return for use in evaluating stocks and projects uesTc3 Finance School of Management Introduction u CAPM is a theory about equilibrium prices in the markets for risky assets u It is important because it provides – a justification for the widespread practice of passive investing called indexing – a way to estimate expected rates of return for use in evaluating stocks and projects