Introduction The mean variance optimization model and the capital goods pricing model will be compared in the assignment because the models are important in investing. MVOM is to find the best method to share investments to achieve the highest return and lowest risks by calculating the risk variance and rate of return in the future. CAPM involves analyzing and calculating expected return and risk to find the best method with the highest profits and lowest risks. CAPM is a supplement to MVOM. The report will discuss the probability distribution assumption, input and output, pros and cons for two models, how the mean-variance optimization model performs when the market imposes MVOM constraints and limitations. Probability Distribution Assumptions: The Probability Distribution The assumption about the distribution of returns on risky assets of the mean variance optimization model is a symmetric bell-shaped distribution whose parabola opens to the right. And the CAPM model is normally distributed. When deriving the mean variance optimization model we use assumptions which are: 1) Investors focus only on the means and variances of the portfolio return over a given period. 2) Investors pursue higher means and lower variances. 3) Investors are risk averse and risk can be represented by variance. 4) Financial markets are frictionless. 5) There are no taxes and transaction costs, and the price and quantity of assets have no restrictions when they are traded. The assumptions of the CAPM model are: 1) Investors can obtain all information at the same time. 2) There are no taxes and transaction costs. 3) With a risk-free interest rate, investors can borrow and lend unlimited amounts. 4) Rational and risk averse. 5）Have homogeneous expectations. 6) All assets are perfectly divisible and liq......middle of paper......for the CAPM are: First, the model is simplicity and definiteness. The model simply divides all risk capital into three factors: risk-free rate of return, price of risk, and risk calculation unit. It can save investors a huge workload. Second, the practicality of the CAPM can help investors evaluate and choose financial assets with absolute risk rather than total risk. The decision for the model is easy to make. However, the model also has some weaknesses: First, the model's assumption is difficult to implement. For example: the market is not complete, the loan rate is different, and the investor's advance is different. Second, beta indicates price mobility in the past. But investors need future price mobility. And beta is difficult to calculate with past data. Third, the combination of risk-free assets and market investments does not exist.