Advanced Micro Devices Inc. (NASDAQ:AMD)

Capital Asset Pricing Model (CAPM)

Capital asset pricing model (CAPM) indicates what should be the expected or required rate of return on risky assets like Advanced Micro Devices Inc. common stock.

Rates of Return
Variance and Covariance
Systematic Risk (β) Estimation
Expected Rate of Return

Rates of Return

Advanced Micro Devices Inc., monthly rates of return

		Advanced Micro Devices Inc. (AMD)			Standard & Poor’s 500 (S&P 500)
t	Date	Price_AMD,t¹	Dividend_AMD,t¹	R_AMD,t²	Price_{S&P 500,t}	R_{S&P 500,t}³
	Jan 31, 2020	$47.00			3,225.52
1.	Feb 29, 2020	$45.48		-3.23%	2,954.22	-8.41%
2.	Mar 31, 2020	$45.48		0.00%	2,584.59	-12.51%
3.	Apr 30, 2020	$52.39		15.19%	2,912.43	12.68%
.	.	.	.	.	.	.
.	.	.	.	.	.	.
.	.	.	.	.	.	.
58.	Nov 30, 2024	$137.18		-4.78%	6,032.38	5.73%
59.	Dec 31, 2024	$120.79		-11.95%	5,881.63	-2.50%
Average (R):				2.72%		1.16%
Standard deviation:				15.47%		5.28%

		Advanced Micro Devices Inc. (AMD)			Standard & Poor’s 500 (S&P 500)
t	Date	Price_AMD,t¹	Dividend_AMD,t¹	R_AMD,t²	Price_{S&P 500,t}	R_{S&P 500,t}³
	Jan 31, 2020	$47.00			3,225.52
1.	Feb 29, 2020	$45.48		-3.23%	2,954.22	-8.41%
2.	Mar 31, 2020	$45.48		0.00%	2,584.59	-12.51%
3.	Apr 30, 2020	$52.39		15.19%	2,912.43	12.68%
4.	May 31, 2020	$53.80		2.69%	3,044.31	4.53%
5.	Jun 30, 2020	$52.61		-2.21%	3,100.29	1.84%
6.	Jul 31, 2020	$77.43		47.18%	3,271.12	5.51%
7.	Aug 31, 2020	$90.82		17.29%	3,500.31	7.01%
8.	Sep 30, 2020	$81.99		-9.72%	3,363.00	-3.92%
9.	Oct 31, 2020	$75.29		-8.17%	3,269.96	-2.77%
10.	Nov 30, 2020	$92.66		23.07%	3,621.63	10.75%
11.	Dec 31, 2020	$91.71		-1.03%	3,756.07	3.71%
12.	Jan 31, 2021	$85.64		-6.62%	3,714.24	-1.11%
13.	Feb 28, 2021	$84.51		-1.32%	3,811.15	2.61%
14.	Mar 31, 2021	$78.50		-7.11%	3,972.89	4.24%
15.	Apr 30, 2021	$81.62		3.97%	4,181.17	5.24%
16.	May 31, 2021	$80.08		-1.89%	4,204.11	0.55%
17.	Jun 30, 2021	$93.93		17.30%	4,297.50	2.22%
18.	Jul 31, 2021	$106.19		13.05%	4,395.26	2.27%
19.	Aug 31, 2021	$110.72		4.27%	4,522.68	2.90%
20.	Sep 30, 2021	$102.90		-7.06%	4,307.54	-4.76%
21.	Oct 31, 2021	$120.23		16.84%	4,605.38	6.91%
22.	Nov 30, 2021	$158.37		31.72%	4,567.00	-0.83%
23.	Dec 31, 2021	$143.90		-9.14%	4,766.18	4.36%
24.	Jan 31, 2022	$114.25		-20.60%	4,515.55	-5.26%
25.	Feb 28, 2022	$123.34		7.96%	4,373.94	-3.14%
26.	Mar 31, 2022	$109.34		-11.35%	4,530.41	3.58%
27.	Apr 30, 2022	$85.52		-21.79%	4,131.93	-8.80%
28.	May 31, 2022	$101.86		19.11%	4,132.15	0.01%
29.	Jun 30, 2022	$76.47		-24.93%	3,785.38	-8.39%
30.	Jul 31, 2022	$94.47		23.54%	4,130.29	9.11%
31.	Aug 31, 2022	$84.87		-10.16%	3,955.00	-4.24%
32.	Sep 30, 2022	$63.36		-25.34%	3,585.62	-9.34%
33.	Oct 31, 2022	$60.06		-5.21%	3,871.98	7.99%
34.	Nov 30, 2022	$77.63		29.25%	4,080.11	5.38%
35.	Dec 31, 2022	$64.77		-16.57%	3,839.50	-5.90%
36.	Jan 31, 2023	$75.15		16.03%	4,076.60	6.18%
37.	Feb 28, 2023	$78.58		4.56%	3,970.15	-2.61%
38.	Mar 31, 2023	$98.01		24.73%	4,109.31	3.51%
39.	Apr 30, 2023	$89.37		-8.82%	4,169.48	1.46%
40.	May 31, 2023	$118.21		32.27%	4,179.83	0.25%
41.	Jun 30, 2023	$113.91		-3.64%	4,376.86	4.71%
42.	Jul 31, 2023	$114.40		0.43%	4,588.96	4.85%
43.	Aug 31, 2023	$105.72		-7.59%	4,507.66	-1.77%
44.	Sep 30, 2023	$102.82		-2.74%	4,288.05	-4.87%
45.	Oct 31, 2023	$98.50		-4.20%	4,193.80	-2.20%
46.	Nov 30, 2023	$121.16		23.01%	4,567.80	8.92%
47.	Dec 31, 2023	$147.41		21.67%	4,769.83	4.42%
48.	Jan 31, 2024	$167.69		13.76%	4,845.65	1.59%
49.	Feb 29, 2024	$192.53		14.81%	5,096.27	5.17%
50.	Mar 31, 2024	$180.49		-6.25%	5,254.35	3.10%
51.	Apr 30, 2024	$158.38		-12.25%	5,035.69	-4.16%
52.	May 31, 2024	$166.90		5.38%	5,277.51	4.80%
53.	Jun 30, 2024	$162.21		-2.81%	5,460.48	3.47%
54.	Jul 31, 2024	$144.48		-10.93%	5,522.30	1.13%
55.	Aug 31, 2024	$148.56		2.82%	5,648.40	2.28%
56.	Sep 30, 2024	$164.08		10.45%	5,762.48	2.02%
57.	Oct 31, 2024	$144.07		-12.20%	5,705.45	-0.99%
58.	Nov 30, 2024	$137.18		-4.78%	6,032.38	5.73%
59.	Dec 31, 2024	$120.79		-11.95%	5,881.63	-2.50%
Average (R):				2.72%		1.16%
Standard deviation:				15.47%		5.28%

Show all

¹ Data in US$ per share of common stock, adjusted for splits and stock dividends.

² Rate of return on common stock of AMD during period t

³ Rate of return on S&P 500 (the market portfolio proxy) during period t

Variance and Covariance

Advanced Micro Devices Inc., calculation of variance and covariance of returns

t	Date	R_AMD,t	R_{S&P 500,t}	(R_AMD,t–R_AMD)²	(R_{S&P 500,t}–R_{S&P 500})²	(R_AMD,t–R_AMD)×(R_{S&P 500,t}–R_{S&P 500})
1.	Feb 29, 2020	-3.23%	-8.41%	35.50	91.63	57.04
2.	Mar 31, 2020	0.00%	-12.51%	7.42	186.96	37.25
3.	Apr 30, 2020	15.19%	12.68%	155.48	132.78	143.68
.	.	.	.	.	.	.
.	.	.	.	.	.	.
.	.	.	.	.	.	.
58.	Nov 30, 2024	-4.78%	5.73%	56.35	20.87	-34.30
59.	Dec 31, 2024	-11.95%	-2.50%	215.27	13.40	53.70
Total (Σ):				13,884.66	1,618.62	2,703.32

t	Date	R_AMD,t	R_{S&P 500,t}	(R_AMD,t–R_AMD)²	(R_{S&P 500,t}–R_{S&P 500})²	(R_AMD,t–R_AMD)×(R_{S&P 500,t}–R_{S&P 500})
1.	Feb 29, 2020	-3.23%	-8.41%	35.50	91.63	57.04
2.	Mar 31, 2020	0.00%	-12.51%	7.42	186.96	37.25
3.	Apr 30, 2020	15.19%	12.68%	155.48	132.78	143.68
4.	May 31, 2020	2.69%	4.53%	0.00	11.34	-0.11
5.	Jun 30, 2020	-2.21%	1.84%	24.37	0.46	-3.34
6.	Jul 31, 2020	47.18%	5.51%	1,976.07	18.91	193.32
7.	Aug 31, 2020	17.29%	7.01%	212.25	34.17	85.16
8.	Sep 30, 2020	-9.72%	-3.92%	154.93	25.85	63.28
9.	Oct 31, 2020	-8.17%	-2.77%	118.73	15.43	42.80
10.	Nov 30, 2020	23.07%	10.75%	413.98	92.03	195.19
11.	Dec 31, 2020	-1.03%	3.71%	14.06	6.51	-9.56
12.	Jan 31, 2021	-6.62%	-1.11%	87.29	5.18	21.25
13.	Feb 28, 2021	-1.32%	2.61%	16.35	2.10	-5.86
14.	Mar 31, 2021	-7.11%	4.24%	96.75	9.50	-30.32
15.	Apr 30, 2021	3.97%	5.24%	1.56	16.66	5.10
16.	May 31, 2021	-1.89%	0.55%	21.26	0.38	2.82
17.	Jun 30, 2021	17.30%	2.22%	212.31	1.12	15.45
18.	Jul 31, 2021	13.05%	2.27%	106.67	1.24	11.50
19.	Aug 31, 2021	4.27%	2.90%	2.38	3.02	2.68
20.	Sep 30, 2021	-7.06%	-4.76%	95.79	35.02	57.92
21.	Oct 31, 2021	16.84%	6.91%	199.30	33.10	81.22
22.	Nov 30, 2021	31.72%	-0.83%	840.89	3.98	-57.84
23.	Dec 31, 2021	-9.14%	4.36%	140.69	10.24	-37.96
24.	Jan 31, 2022	-20.60%	-5.26%	544.24	41.21	149.77
25.	Feb 28, 2022	7.96%	-3.14%	27.37	18.47	-22.48
26.	Mar 31, 2022	-11.35%	3.58%	198.11	5.84	-34.01
27.	Apr 30, 2022	-21.79%	-8.80%	600.72	99.14	244.04
28.	May 31, 2022	19.11%	0.01%	268.38	1.34	-18.94
29.	Jun 30, 2022	-24.93%	-8.39%	764.56	91.26	264.16
30.	Jul 31, 2022	23.54%	9.11%	433.23	63.21	165.48
31.	Aug 31, 2022	-10.16%	-4.24%	166.06	29.22	69.65
32.	Sep 30, 2022	-25.34%	-9.34%	787.87	110.27	294.75
33.	Oct 31, 2022	-5.21%	7.99%	62.93	46.58	-54.14
34.	Nov 30, 2022	29.25%	5.38%	703.82	17.76	111.80
35.	Dec 31, 2022	-16.57%	-5.90%	372.11	49.82	136.16
36.	Jan 31, 2023	16.03%	6.18%	176.93	25.14	66.69
37.	Feb 28, 2023	4.56%	-2.61%	3.38	14.23	-6.94
38.	Mar 31, 2023	24.73%	3.51%	484.09	5.49	51.57
39.	Apr 30, 2023	-8.82%	1.46%	133.17	0.09	-3.50
40.	May 31, 2023	32.27%	0.25%	872.96	0.83	-26.98
41.	Jun 30, 2023	-3.64%	4.71%	40.47	12.62	-22.60
42.	Jul 31, 2023	0.43%	4.85%	5.26	13.58	-8.45
43.	Aug 31, 2023	-7.59%	-1.77%	106.33	8.60	30.24
44.	Sep 30, 2023	-2.74%	-4.87%	29.89	36.40	32.99
45.	Oct 31, 2023	-4.20%	-2.20%	47.97	11.28	23.27
46.	Nov 30, 2023	23.01%	8.92%	411.31	60.17	157.31
47.	Dec 31, 2023	21.67%	4.42%	358.77	10.64	61.78
48.	Jan 31, 2024	13.76%	1.59%	121.73	0.18	4.73
49.	Feb 29, 2024	14.81%	5.17%	146.14	16.09	48.49
50.	Mar 31, 2024	-6.25%	3.10%	80.60	3.77	-17.42
51.	Apr 30, 2024	-12.25%	-4.16%	224.23	28.33	79.71
52.	May 31, 2024	5.38%	4.80%	7.05	13.26	9.67
53.	Jun 30, 2024	-2.81%	3.47%	30.63	5.32	-12.76
54.	Jul 31, 2024	-10.93%	1.13%	186.45	0.00	0.40
55.	Aug 31, 2024	2.82%	2.28%	0.01	1.26	0.11
56.	Sep 30, 2024	10.45%	2.02%	59.64	0.74	6.63
57.	Oct 31, 2024	-12.20%	-0.99%	222.60	4.63	32.09
58.	Nov 30, 2024	-4.78%	5.73%	56.35	20.87	-34.30
59.	Dec 31, 2024	-11.95%	-2.50%	215.27	13.40	53.70
Total (Σ):				13,884.66	1,618.62	2,703.32

Show all

Variance_AMD = Σ(R_AMD,t–R_AMD)² ÷ (59 – 1)
= 13,884.66 ÷ (59 – 1)
= 239.39

Variance_{S&P 500} = Σ(R_{S&P 500,t}–R_{S&P 500})² ÷ (59 – 1)
= 1,618.62 ÷ (59 – 1)
= 27.91

Covariance_{AMD, S&P 500} = Σ(R_AMD,t–R_AMD)×(R_{S&P 500,t}–R_{S&P 500}) ÷ (59 – 1)
= 2,703.32 ÷ (59 – 1)
= 46.61

Systematic Risk (β) Estimation

Variance_AMD	239.39
Variance_{S&P 500}	27.91
Covariance_{AMD, S&P 500}	46.61
Correlation coefficient_{AMD, S&P 500}¹	0.57
β_AMD²	1.67
α_AMD³	0.78%

Calculations

¹ Correlation coefficient_{AMD, S&P 500}
= Covariance_{AMD, S&P 500} ÷ (Standard deviation_AMD × Standard deviation_{S&P 500})
= 46.61 ÷ (15.47% × 5.28%)
= 0.57

² β_AMD
= Covariance_{AMD, S&P 500} ÷ Variance_{S&P 500}
= 46.61 ÷ 27.91
= 1.67

³ α_AMD
= Average_AMD – β_AMD × Average_{S&P 500}
= 2.72% – 1.67 × 1.16%
= 0.78%

Expected Rate of Return

Assumptions
Rate of return on LT Treasury Composite¹	R_F	4.78%
Expected rate of return on market portfolio²	E(R_M)	14.43%
Systematic risk (β) of Advanced Micro Devices Inc. common stock	β_AMD	1.67

Expected rate of return on Advanced Micro Devices Inc. common stock³	E(R_AMD)	20.89%

¹ Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

² See details »

³ E(R_AMD) = R_F + β_AMD [E(R_M) – R_F]
= 4.78% + 1.67 [14.43% – 4.78%]
= 20.89%