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 Applied Materials Inc. common stock.
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Applied Materials Inc. pages available for free this week:
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Profitability Ratios
- Analysis of Solvency Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Analysis of Geographic Areas
- Price to FCFE (P/FCFE)
- Operating Profit Margin since 2005
- Total Asset Turnover since 2005
- Analysis of Revenues
- Aggregate Accruals
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Rates of Return
Applied Materials Inc., monthly rates of return
| Applied Materials Inc. (AMAT) | Standard & Poor’s 500 (S&P 500) | |||||
|---|---|---|---|---|---|---|
| t | Date | PriceAMAT,t1 | DividendAMAT,t1 | RAMAT,t2 | PriceS&P 500,t | RS&P 500,t3 |
| Nov 30, 2018 | ||||||
| 1. | Dec 31, 2018 | |||||
| 2. | Jan 31, 2019 | |||||
| 3. | Feb 28, 2019 | |||||
| . | . | . | . | . | . | . |
| . | . | . | . | . | . | . |
| . | . | . | . | . | . | . |
| 70. | Sep 30, 2024 | |||||
| 71. | Oct 31, 2024 | |||||
| Average (R): | ||||||
| Standard deviation: | ||||||
| Applied Materials Inc. (AMAT) | Standard & Poor’s 500 (S&P 500) | |||||
|---|---|---|---|---|---|---|
| t | Date | PriceAMAT,t1 | DividendAMAT,t1 | RAMAT,t2 | PriceS&P 500,t | RS&P 500,t3 |
| Nov 30, 2018 | ||||||
| 1. | Dec 31, 2018 | |||||
| 2. | Jan 31, 2019 | |||||
| 3. | Feb 28, 2019 | |||||
| 4. | Mar 31, 2019 | |||||
| 5. | Apr 30, 2019 | |||||
| 6. | May 31, 2019 | |||||
| 7. | Jun 30, 2019 | |||||
| 8. | Jul 31, 2019 | |||||
| 9. | Aug 31, 2019 | |||||
| 10. | Sep 30, 2019 | |||||
| 11. | Oct 31, 2019 | |||||
| 12. | Nov 30, 2019 | |||||
| 13. | Dec 31, 2019 | |||||
| 14. | Jan 31, 2020 | |||||
| 15. | Feb 29, 2020 | |||||
| 16. | Mar 31, 2020 | |||||
| 17. | Apr 30, 2020 | |||||
| 18. | May 31, 2020 | |||||
| 19. | Jun 30, 2020 | |||||
| 20. | Jul 31, 2020 | |||||
| 21. | Aug 31, 2020 | |||||
| 22. | Sep 30, 2020 | |||||
| 23. | Oct 31, 2020 | |||||
| 24. | Nov 30, 2020 | |||||
| 25. | Dec 31, 2020 | |||||
| 26. | Jan 31, 2021 | |||||
| 27. | Feb 28, 2021 | |||||
| 28. | Mar 31, 2021 | |||||
| 29. | Apr 30, 2021 | |||||
| 30. | May 31, 2021 | |||||
| 31. | Jun 30, 2021 | |||||
| 32. | Jul 31, 2021 | |||||
| 33. | Aug 31, 2021 | |||||
| 34. | Sep 30, 2021 | |||||
| 35. | Oct 31, 2021 | |||||
| 36. | Nov 30, 2021 | |||||
| 37. | Dec 31, 2021 | |||||
| 38. | Jan 31, 2022 | |||||
| 39. | Feb 28, 2022 | |||||
| 40. | Mar 31, 2022 | |||||
| 41. | Apr 30, 2022 | |||||
| 42. | May 31, 2022 | |||||
| 43. | Jun 30, 2022 | |||||
| 44. | Jul 31, 2022 | |||||
| 45. | Aug 31, 2022 | |||||
| 46. | Sep 30, 2022 | |||||
| 47. | Oct 31, 2022 | |||||
| 48. | Nov 30, 2022 | |||||
| 49. | Dec 31, 2022 | |||||
| 50. | Jan 31, 2023 | |||||
| 51. | Feb 28, 2023 | |||||
| 52. | Mar 31, 2023 | |||||
| 53. | Apr 30, 2023 | |||||
| 54. | May 31, 2023 | |||||
| 55. | Jun 30, 2023 | |||||
| 56. | Jul 31, 2023 | |||||
| 57. | Aug 31, 2023 | |||||
| 58. | Sep 30, 2023 | |||||
| 59. | Oct 31, 2023 | |||||
| 60. | Nov 30, 2023 | |||||
| 61. | Dec 31, 2023 | |||||
| 62. | Jan 31, 2024 | |||||
| 63. | Feb 29, 2024 | |||||
| 64. | Mar 31, 2024 | |||||
| 65. | Apr 30, 2024 | |||||
| 66. | May 31, 2024 | |||||
| 67. | Jun 30, 2024 | |||||
| 68. | Jul 31, 2024 | |||||
| 69. | Aug 31, 2024 | |||||
| 70. | Sep 30, 2024 | |||||
| 71. | Oct 31, 2024 | |||||
| Average (R): | ||||||
| Standard deviation: | ||||||
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 AMAT during period t
3 Rate of return on S&P 500 (the market portfolio proxy) during period t
Variance and Covariance
Applied Materials Inc., calculation of variance and covariance of returns
| t | Date | RAMAT,t | RS&P 500,t | (RAMAT,t–RAMAT)2 | (RS&P 500,t–RS&P 500)2 | (RAMAT,t–RAMAT)×(RS&P 500,t–RS&P 500) |
|---|---|---|---|---|---|---|
| 1. | Dec 31, 2018 | |||||
| 2. | Jan 31, 2019 | |||||
| 3. | Feb 28, 2019 | |||||
| . | . | . | . | . | . | . |
| . | . | . | . | . | . | . |
| . | . | . | . | . | . | . |
| 70. | Sep 30, 2024 | |||||
| 71. | Oct 31, 2024 | |||||
| Total (Σ): | ||||||
| t | Date | RAMAT,t | RS&P 500,t | (RAMAT,t–RAMAT)2 | (RS&P 500,t–RS&P 500)2 | (RAMAT,t–RAMAT)×(RS&P 500,t–RS&P 500) |
|---|---|---|---|---|---|---|
| 1. | Dec 31, 2018 | |||||
| 2. | Jan 31, 2019 | |||||
| 3. | Feb 28, 2019 | |||||
| 4. | Mar 31, 2019 | |||||
| 5. | Apr 30, 2019 | |||||
| 6. | May 31, 2019 | |||||
| 7. | Jun 30, 2019 | |||||
| 8. | Jul 31, 2019 | |||||
| 9. | Aug 31, 2019 | |||||
| 10. | Sep 30, 2019 | |||||
| 11. | Oct 31, 2019 | |||||
| 12. | Nov 30, 2019 | |||||
| 13. | Dec 31, 2019 | |||||
| 14. | Jan 31, 2020 | |||||
| 15. | Feb 29, 2020 | |||||
| 16. | Mar 31, 2020 | |||||
| 17. | Apr 30, 2020 | |||||
| 18. | May 31, 2020 | |||||
| 19. | Jun 30, 2020 | |||||
| 20. | Jul 31, 2020 | |||||
| 21. | Aug 31, 2020 | |||||
| 22. | Sep 30, 2020 | |||||
| 23. | Oct 31, 2020 | |||||
| 24. | Nov 30, 2020 | |||||
| 25. | Dec 31, 2020 | |||||
| 26. | Jan 31, 2021 | |||||
| 27. | Feb 28, 2021 | |||||
| 28. | Mar 31, 2021 | |||||
| 29. | Apr 30, 2021 | |||||
| 30. | May 31, 2021 | |||||
| 31. | Jun 30, 2021 | |||||
| 32. | Jul 31, 2021 | |||||
| 33. | Aug 31, 2021 | |||||
| 34. | Sep 30, 2021 | |||||
| 35. | Oct 31, 2021 | |||||
| 36. | Nov 30, 2021 | |||||
| 37. | Dec 31, 2021 | |||||
| 38. | Jan 31, 2022 | |||||
| 39. | Feb 28, 2022 | |||||
| 40. | Mar 31, 2022 | |||||
| 41. | Apr 30, 2022 | |||||
| 42. | May 31, 2022 | |||||
| 43. | Jun 30, 2022 | |||||
| 44. | Jul 31, 2022 | |||||
| 45. | Aug 31, 2022 | |||||
| 46. | Sep 30, 2022 | |||||
| 47. | Oct 31, 2022 | |||||
| 48. | Nov 30, 2022 | |||||
| 49. | Dec 31, 2022 | |||||
| 50. | Jan 31, 2023 | |||||
| 51. | Feb 28, 2023 | |||||
| 52. | Mar 31, 2023 | |||||
| 53. | Apr 30, 2023 | |||||
| 54. | May 31, 2023 | |||||
| 55. | Jun 30, 2023 | |||||
| 56. | Jul 31, 2023 | |||||
| 57. | Aug 31, 2023 | |||||
| 58. | Sep 30, 2023 | |||||
| 59. | Oct 31, 2023 | |||||
| 60. | Nov 30, 2023 | |||||
| 61. | Dec 31, 2023 | |||||
| 62. | Jan 31, 2024 | |||||
| 63. | Feb 29, 2024 | |||||
| 64. | Mar 31, 2024 | |||||
| 65. | Apr 30, 2024 | |||||
| 66. | May 31, 2024 | |||||
| 67. | Jun 30, 2024 | |||||
| 68. | Jul 31, 2024 | |||||
| 69. | Aug 31, 2024 | |||||
| 70. | Sep 30, 2024 | |||||
| 71. | Oct 31, 2024 | |||||
| Total (Σ): | ||||||
Show all
VarianceAMAT = Σ(RAMAT,t–RAMAT)2 ÷ (71 – 1)
= ÷ (71 – 1)
=
VarianceS&P 500 = Σ(RS&P 500,t–RS&P 500)2 ÷ (71 – 1)
= ÷ (71 – 1)
=
CovarianceAMAT, S&P 500 = Σ(RAMAT,t–RAMAT)×(RS&P 500,t–RS&P 500) ÷ (71 – 1)
= ÷ (71 – 1)
=
Systematic Risk (β) Estimation
| VarianceAMAT | |
| VarianceS&P 500 | |
| CovarianceAMAT, S&P 500 | |
| Correlation coefficientAMAT, S&P 5001 | |
| βAMAT2 | |
| αAMAT3 |
Calculations
1 Correlation coefficientAMAT, S&P 500
= CovarianceAMAT, S&P 500 ÷ (Standard deviationAMAT × Standard deviationS&P 500)
= ÷ ( × )
=
2 βAMAT
= CovarianceAMAT, S&P 500 ÷ VarianceS&P 500
= ÷
=
3 αAMAT
= AverageAMAT – βAMAT × AverageS&P 500
= – ×
=
Expected Rate of Return
| Assumptions | ||
| Rate of return on LT Treasury Composite1 | RF | |
| Expected rate of return on market portfolio2 | E(RM) | |
| Systematic risk (β) of Applied Materials Inc. common stock | βAMAT | |
| Expected rate of return on Applied Materials Inc. common stock3 | E(RAMAT) | |
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).
3 E(RAMAT) = RF + βAMAT [E(RM) – RF]
= + [ – ]
=