It extended Modern Portfolio Theory to introduce the notions of systematic and specific risk. All investors have identical investment horizons. All investors have identical perceptions regarding the expected returns, volatilities and correlations of available risky investments. All investors will hold the market portfolio, leveraging or deleveraging it with positions in the risk-free asset . CAPM divides the risk of holding risky assets into systematic and specific risk.
Systematic risk is the risk of holding the market portfolio.
As the market moves, each individual asset is more or less affected. To the extent that any asset is affected by such general market moves, that asset entails systematic risk. Specific risk is the risk which is unique to an individual asset. It represents the component of an asset's volatility which is uncorrelated with general market moves. According to CAPM, the marketplace compensates investors for taking systematic risk, but not for taking specific risk.