A Chance‐constraint Programming Approach to the Capital Pricing Model

A probabilistic setting is utilised in order to explain capital asset pricing, and an alternative expression for the beta‐risk premium of the Standard Capital Asset‐Pricing Model (CAPM) is derived. It is shown that the extended beta‐coefficient has the potential to explain the company‐size effect and the tendency towards underestimation of the systematic risk within the standard CAPM framework.