This paper proposes a theoretical framework to incorporate a firm’s intrinsic value and market2trading value into asset pricing model . The paper show that asset return can be decomposed into two components. The first component , called the firmfactor , is related to the output of a firm and is proportional to return on equity. The sec2 ond component , termed the market factor , is the relative change of P/ B ratio and is related to market return. Then a new capital asset pricing model that integrates both the firmfactor and the market factor is developed. In addition , when cash dividend is present , the two2factor model under industry equilibrium and market equilibrium is derived. This simple , two2factor model explicitly explains , in a symmetric fashion , the economic implication of individual firm and collective market on asset pricing. Empirical analysis on historical data from COMPUSTAT is provided