RoyaltyStat Blog

The CAPM is Misapplied in Transfer Pricing

Posted by Ednaldo Silva

Again the restless orb (orphan, blind) his toil renews, and sweat descends in dews. Homer, Odyssey, Book 11, 740-741.

The capital asset pricing model (CAPM) is widely used to calculate the expected return of equity shares, considering their risk relative to a stock market portfolio. The CAPM is ill-suited to valuing assets that lack stock’s spot market price volatility. Thus, I argue that the CAPM should not be used to determine the arm’s length remuneration for the intra-group transfer of intangibles.

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