Capital asset pricing model (CAPM) indicates what should be the expected or required rate of return on risky assets like Cytokinetics Inc. common stock.
Rates of Return
Cytokinetics Inc. (CYTK) | Standard & Poor’s 500 (S&P 500) | |||||
---|---|---|---|---|---|---|
t | Date | PriceCYTK,t1 | DividendCYTK,t1 | RCYTK,t2 | PriceS&P 500,t | RS&P 500,t3 |
Jan 31, 2018 | $9.20 | 2,823.81 | ||||
1. | Feb 28, 2018 | $7.75 | -15.76% | 2,713.83 | -3.89% | |
2. | Mar 31, 2018 | $7.20 | -7.10% | 2,640.87 | -2.69% | |
3. | Apr 30, 2018 | $8.30 | 15.28% | 2,648.05 | 0.27% | |
. | . | . | . | . | . | . |
. | . | . | . | . | . | . |
. | . | . | . | . | . | . |
58. | Nov 30, 2022 | $42.50 | -2.66% | 4,080.11 | 5.38% | |
59. | Dec 31, 2022 | $45.82 | 7.81% | 3,839.50 | -5.90% | |
Average (R): | 3.99% | 0.67% | ||||
Standard deviation: | 15.94% | 5.40% |
Cytokinetics Inc. (CYTK) | Standard & Poor’s 500 (S&P 500) | |||||
---|---|---|---|---|---|---|
t | Date | PriceCYTK,t1 | DividendCYTK,t1 | RCYTK,t2 | PriceS&P 500,t | RS&P 500,t3 |
Jan 31, 2018 | $9.20 | 2,823.81 | ||||
1. | Feb 28, 2018 | $7.75 | -15.76% | 2,713.83 | -3.89% | |
2. | Mar 31, 2018 | $7.20 | -7.10% | 2,640.87 | -2.69% | |
3. | Apr 30, 2018 | $8.30 | 15.28% | 2,648.05 | 0.27% | |
4. | May 31, 2018 | $9.00 | 8.43% | 2,705.27 | 2.16% | |
5. | Jun 30, 2018 | $8.30 | -7.78% | 2,718.37 | 0.48% | |
6. | Jul 31, 2018 | $7.35 | -11.45% | 2,816.29 | 3.60% | |
7. | Aug 31, 2018 | $7.90 | 7.48% | 2,901.52 | 3.03% | |
8. | Sep 30, 2018 | $9.85 | 24.68% | 2,913.98 | 0.43% | |
9. | Oct 31, 2018 | $6.69 | -32.08% | 2,711.74 | -6.94% | |
10. | Nov 30, 2018 | $7.86 | 17.49% | 2,760.17 | 1.79% | |
11. | Dec 31, 2018 | $6.32 | -19.59% | 2,506.85 | -9.18% | |
12. | Jan 31, 2019 | $7.03 | 11.23% | 2,704.10 | 7.87% | |
13. | Feb 28, 2019 | $7.22 | 2.70% | 2,784.49 | 2.97% | |
14. | Mar 31, 2019 | $8.09 | 12.05% | 2,834.40 | 1.79% | |
15. | Apr 30, 2019 | $8.82 | 9.02% | 2,945.83 | 3.93% | |
16. | May 31, 2019 | $10.37 | 17.57% | 2,752.06 | -6.58% | |
17. | Jun 30, 2019 | $11.25 | 8.49% | 2,941.76 | 6.89% | |
18. | Jul 31, 2019 | $12.19 | 8.36% | 2,980.38 | 1.31% | |
19. | Aug 31, 2019 | $14.05 | 15.26% | 2,926.46 | -1.81% | |
20. | Sep 30, 2019 | $11.38 | -19.00% | 2,976.74 | 1.72% | |
21. | Oct 31, 2019 | $11.65 | 2.37% | 3,037.56 | 2.04% | |
22. | Nov 30, 2019 | $9.67 | -17.00% | 3,140.98 | 3.40% | |
23. | Dec 31, 2019 | $10.61 | 9.72% | 3,230.78 | 2.86% | |
24. | Jan 31, 2020 | $12.30 | 15.93% | 3,225.52 | -0.16% | |
25. | Feb 29, 2020 | $13.94 | 13.33% | 2,954.22 | -8.41% | |
26. | Mar 31, 2020 | $11.79 | -15.42% | 2,584.59 | -12.51% | |
27. | Apr 30, 2020 | $15.11 | 28.16% | 2,912.43 | 12.68% | |
28. | May 31, 2020 | $20.71 | 37.06% | 3,044.31 | 4.53% | |
29. | Jun 30, 2020 | $23.57 | 13.81% | 3,100.29 | 1.84% | |
30. | Jul 31, 2020 | $21.62 | -8.27% | 3,271.12 | 5.51% | |
31. | Aug 31, 2020 | $23.96 | 10.82% | 3,500.31 | 7.01% | |
32. | Sep 30, 2020 | $21.65 | -9.64% | 3,363.00 | -3.92% | |
33. | Oct 31, 2020 | $15.37 | -29.01% | 3,269.96 | -2.77% | |
34. | Nov 30, 2020 | $16.80 | 9.30% | 3,621.63 | 10.75% | |
35. | Dec 31, 2020 | $20.78 | 23.69% | 3,756.07 | 3.71% | |
36. | Jan 31, 2021 | $19.67 | -5.34% | 3,714.24 | -1.11% | |
37. | Feb 28, 2021 | $18.73 | -4.78% | 3,811.15 | 2.61% | |
38. | Mar 31, 2021 | $23.26 | 24.19% | 3,972.89 | 4.24% | |
39. | Apr 30, 2021 | $25.44 | 9.37% | 4,181.17 | 5.24% | |
40. | May 31, 2021 | $21.83 | -14.19% | 4,204.11 | 0.55% | |
41. | Jun 30, 2021 | $19.79 | -9.34% | 4,297.50 | 2.22% | |
42. | Jul 31, 2021 | $29.68 | 49.97% | 4,395.26 | 2.27% | |
43. | Aug 31, 2021 | $32.97 | 11.08% | 4,522.68 | 2.90% | |
44. | Sep 30, 2021 | $35.74 | 8.40% | 4,307.54 | -4.76% | |
45. | Oct 31, 2021 | $34.91 | -2.32% | 4,605.38 | 6.91% | |
46. | Nov 30, 2021 | $39.34 | 12.69% | 4,567.00 | -0.83% | |
47. | Dec 31, 2021 | $45.58 | 15.86% | 4,766.18 | 4.36% | |
48. | Jan 31, 2022 | $33.19 | -27.18% | 4,515.55 | -5.26% | |
49. | Feb 28, 2022 | $35.32 | 6.42% | 4,373.94 | -3.14% | |
50. | Mar 31, 2022 | $36.81 | 4.22% | 4,530.41 | 3.58% | |
51. | Apr 30, 2022 | $39.87 | 8.31% | 4,131.93 | -8.80% | |
52. | May 31, 2022 | $39.90 | 0.08% | 4,132.15 | 0.01% | |
53. | Jun 30, 2022 | $39.29 | -1.53% | 3,785.38 | -8.39% | |
54. | Jul 31, 2022 | $42.33 | 7.74% | 4,130.29 | 9.11% | |
55. | Aug 31, 2022 | $52.96 | 25.11% | 3,955.00 | -4.24% | |
56. | Sep 30, 2022 | $48.45 | -8.52% | 3,585.62 | -9.34% | |
57. | Oct 31, 2022 | $43.66 | -9.89% | 3,871.98 | 7.99% | |
58. | Nov 30, 2022 | $42.50 | -2.66% | 4,080.11 | 5.38% | |
59. | Dec 31, 2022 | $45.82 | 7.81% | 3,839.50 | -5.90% | |
Average (R): | 3.99% | 0.67% | ||||
Standard deviation: | 15.94% | 5.40% |
Show all
1 Data in US$ per share of common stock, adjusted for splits and stock dividends.
2 Rate of return on common stock of CYTK during period t
3 Rate of return on S&P 500 (the market portfolio proxy) during period t
Variance and Covariance
t | Date | RCYTK,t | RS&P 500,t | (RCYTK,t–RCYTK)2 | (RS&P 500,t–RS&P 500)2 | (RCYTK,t–RCYTK)×(RS&P 500,t–RS&P 500) |
---|---|---|---|---|---|---|
1. | Feb 28, 2018 | -15.76% | -3.89% | 390.27 | 20.81 | 90.11 |
2. | Mar 31, 2018 | -7.10% | -2.69% | 123.01 | 11.26 | 37.21 |
3. | Apr 30, 2018 | 15.28% | 0.27% | 127.32 | 0.16 | -4.45 |
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. | . | . | . | . | . | . |
. | . | . | . | . | . | . |
58. | Nov 30, 2022 | -2.66% | 5.38% | 44.24 | 22.17 | -31.32 |
59. | Dec 31, 2022 | 7.81% | -5.90% | 14.57 | 43.08 | -25.06 |
Total (Σ): | 14,745.77 | 1,691.48 | 1,601.42 |
t | Date | RCYTK,t | RS&P 500,t | (RCYTK,t–RCYTK)2 | (RS&P 500,t–RS&P 500)2 | (RCYTK,t–RCYTK)×(RS&P 500,t–RS&P 500) |
---|---|---|---|---|---|---|
1. | Feb 28, 2018 | -15.76% | -3.89% | 390.27 | 20.81 | 90.11 |
2. | Mar 31, 2018 | -7.10% | -2.69% | 123.01 | 11.26 | 37.21 |
3. | Apr 30, 2018 | 15.28% | 0.27% | 127.32 | 0.16 | -4.45 |
4. | May 31, 2018 | 8.43% | 2.16% | 19.71 | 2.23 | 6.63 |
5. | Jun 30, 2018 | -7.78% | 0.48% | 138.58 | 0.03 | 2.15 |
6. | Jul 31, 2018 | -11.45% | 3.60% | 238.40 | 8.62 | -45.32 |
7. | Aug 31, 2018 | 7.48% | 3.03% | 12.17 | 5.57 | 8.23 |
8. | Sep 30, 2018 | 24.68% | 0.43% | 428.05 | 0.06 | -4.91 |
9. | Oct 31, 2018 | -32.08% | -6.94% | 1,301.44 | 57.87 | 274.43 |
10. | Nov 30, 2018 | 17.49% | 1.79% | 182.10 | 1.25 | 15.10 |
11. | Dec 31, 2018 | -19.59% | -9.18% | 556.35 | 96.91 | 232.20 |
12. | Jan 31, 2019 | 11.23% | 7.87% | 52.42 | 51.87 | 52.14 |
13. | Feb 28, 2019 | 2.70% | 2.97% | 1.67 | 5.32 | -2.98 |
14. | Mar 31, 2019 | 12.05% | 1.79% | 64.89 | 1.27 | 9.07 |
15. | Apr 30, 2019 | 9.02% | 3.93% | 25.29 | 10.66 | 16.42 |
16. | May 31, 2019 | 17.57% | -6.58% | 184.40 | 52.48 | -98.37 |
17. | Jun 30, 2019 | 8.49% | 6.89% | 20.18 | 38.77 | 27.97 |
18. | Jul 31, 2019 | 8.36% | 1.31% | 19.02 | 0.42 | 2.82 |
19. | Aug 31, 2019 | 15.26% | -1.81% | 126.88 | 6.13 | -27.89 |
20. | Sep 30, 2019 | -19.00% | 1.72% | 528.90 | 1.11 | -24.18 |
21. | Oct 31, 2019 | 2.37% | 2.04% | 2.63 | 1.89 | -2.23 |
22. | Nov 30, 2019 | -17.00% | 3.40% | 440.58 | 7.50 | -57.47 |
23. | Dec 31, 2019 | 9.72% | 2.86% | 32.79 | 4.81 | 12.55 |
24. | Jan 31, 2020 | 15.93% | -0.16% | 142.42 | 0.69 | -9.90 |
25. | Feb 29, 2020 | 13.33% | -8.41% | 87.22 | 82.40 | -84.78 |
26. | Mar 31, 2020 | -15.42% | -12.51% | 377.04 | 173.67 | 255.90 |
27. | Apr 30, 2020 | 28.16% | 12.68% | 583.96 | 144.43 | 290.41 |
28. | May 31, 2020 | 37.06% | 4.53% | 1,093.44 | 14.91 | 127.69 |
29. | Jun 30, 2020 | 13.81% | 1.84% | 96.34 | 1.37 | 11.51 |
30. | Jul 31, 2020 | -8.27% | 5.51% | 150.49 | 23.46 | -59.42 |
31. | Aug 31, 2020 | 10.82% | 7.01% | 46.64 | 40.19 | 43.29 |
32. | Sep 30, 2020 | -9.64% | -3.92% | 185.92 | 21.06 | 62.58 |
33. | Oct 31, 2020 | -29.01% | -2.77% | 1,089.08 | 11.79 | 113.30 |
34. | Nov 30, 2020 | 9.30% | 10.75% | 28.19 | 101.77 | 53.56 |
35. | Dec 31, 2020 | 23.69% | 3.71% | 387.94 | 9.28 | 59.98 |
36. | Jan 31, 2021 | -5.34% | -1.11% | 87.16 | 3.17 | 16.62 |
37. | Feb 28, 2021 | -4.78% | 2.61% | 76.97 | 3.77 | -17.04 |
38. | Mar 31, 2021 | 24.19% | 4.24% | 407.70 | 12.80 | 72.23 |
39. | Apr 30, 2021 | 9.37% | 5.24% | 28.92 | 20.94 | 24.61 |
40. | May 31, 2021 | -14.19% | 0.55% | 330.68 | 0.01 | 2.15 |
41. | Jun 30, 2021 | -9.34% | 2.22% | 177.93 | 2.42 | -20.74 |
42. | Jul 31, 2021 | 49.97% | 2.27% | 2,114.20 | 2.59 | 73.94 |
43. | Aug 31, 2021 | 11.08% | 2.90% | 50.28 | 4.98 | 15.83 |
44. | Sep 30, 2021 | 8.40% | -4.76% | 19.42 | 29.42 | -23.90 |
45. | Oct 31, 2021 | -2.32% | 6.91% | 39.90 | 39.03 | -39.46 |
46. | Nov 30, 2021 | 12.69% | -0.83% | 75.61 | 2.25 | -13.04 |
47. | Dec 31, 2021 | 15.86% | 4.36% | 140.84 | 13.65 | 43.85 |
48. | Jan 31, 2022 | -27.18% | -5.26% | 972.02 | 35.11 | 184.73 |
49. | Feb 28, 2022 | 6.42% | -3.14% | 5.87 | 14.46 | -9.22 |
50. | Mar 31, 2022 | 4.22% | 3.58% | 0.05 | 8.47 | 0.65 |
51. | Apr 30, 2022 | 8.31% | -8.80% | 18.65 | 89.54 | -40.86 |
52. | May 31, 2022 | 0.08% | 0.01% | 15.36 | 0.44 | 2.59 |
53. | Jun 30, 2022 | -1.53% | -8.39% | 30.50 | 82.06 | 50.03 |
54. | Jul 31, 2022 | 7.74% | 9.11% | 14.01 | 71.32 | 31.61 |
55. | Aug 31, 2022 | 25.11% | -4.24% | 445.97 | 24.11 | -103.70 |
56. | Sep 30, 2022 | -8.52% | -9.34% | 156.50 | 100.12 | 125.18 |
57. | Oct 31, 2022 | -9.89% | 7.99% | 192.68 | 53.58 | -101.60 |
58. | Nov 30, 2022 | -2.66% | 5.38% | 44.24 | 22.17 | -31.32 |
59. | Dec 31, 2022 | 7.81% | -5.90% | 14.57 | 43.08 | -25.06 |
Total (Σ): | 14,745.77 | 1,691.48 | 1,601.42 |
Show all
VarianceCYTK = Σ(RCYTK,t–RCYTK)2 ÷ (59 – 1)
= 14,745.77 ÷ (59 – 1)
= 254.24
VarianceS&P 500 = Σ(RS&P 500,t–RS&P 500)2 ÷ (59 – 1)
= 1,691.48 ÷ (59 – 1)
= 29.16
CovarianceCYTK, S&P 500 = Σ(RCYTK,t–RCYTK)×(RS&P 500,t–RS&P 500) ÷ (59 – 1)
= 1,601.42 ÷ (59 – 1)
= 27.61
Systematic Risk (β) Estimation
VarianceCYTK | 254.24 |
VarianceS&P 500 | 29.16 |
CovarianceCYTK, S&P 500 | 27.61 |
Correlation coefficientCYTK, S&P 5001 | 0.32 |
βCYTK2 | 0.95 |
αCYTK3 | 3.36% |
Calculations
1 Correlation coefficientCYTK, S&P 500
= CovarianceCYTK, S&P 500 ÷ (Standard deviationCYTK × Standard deviationS&P 500)
= 27.61 ÷ (15.94% × 5.40%)
= 0.32
2 βCYTK
= CovarianceCYTK, S&P 500 ÷ VarianceS&P 500
= 27.61 ÷ 29.16
= 0.95
3 αCYTK
= AverageCYTK – βCYTK × AverageS&P 500
= 3.99% – 0.95 × 0.67%
= 3.36%
Expected Rate of Return
Assumptions | ||
Rate of return on LT Treasury Composite1 | RF | 4.67% |
Expected rate of return on market portfolio2 | E(RM) | 13.79% |
Systematic risk (β) of Cytokinetics Inc. common stock | βCYTK | 0.95 |
Expected rate of return on Cytokinetics Inc. common stock3 | E(RCYTK) | 13.30% |
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(RCYTK) = RF + βCYTK [E(RM) – RF]
= 4.67% + 0.95 [13.79% – 4.67%]
= 13.30%