Starbucks Corp. (NASDAQ:SBUX)

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 Starbucks Corp. common stock.

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

Rates of Return

Starbucks Corp., monthly rates of return

		Starbucks Corp. (SBUX)			Standard & Poor’s 500 (S&P 500)
t	Date	Price_SBUX,t¹	Dividend_SBUX,t¹	R_SBUX,t²	Price_{S&P 500,t}	R_{S&P 500,t}³
	Oct 31, 2018	$58.27			2,711.74
1.	Nov 30, 2018	$66.72	$0.36	15.12%	2,760.17	1.79%
2.	Dec 31, 2018	$64.40		-3.48%	2,506.85	-9.18%
3.	Jan 31, 2019	$68.14		5.81%	2,704.10	7.87%
.	.	.	.	.	.	.
.	.	.	.	.	.	.
.	.	.	.	.	.	.
70.	Aug 31, 2024	$94.57	$0.57	22.05%	5,648.40	2.28%
71.	Sep 30, 2024	$97.49		3.09%	5,762.48	2.02%
Average (R):				1.21%		1.20%
Standard deviation:				7.97%		5.15%

		Starbucks Corp. (SBUX)			Standard & Poor’s 500 (S&P 500)
t	Date	Price_SBUX,t¹	Dividend_SBUX,t¹	R_SBUX,t²	Price_{S&P 500,t}	R_{S&P 500,t}³
	Oct 31, 2018	$58.27			2,711.74
1.	Nov 30, 2018	$66.72	$0.36	15.12%	2,760.17	1.79%
2.	Dec 31, 2018	$64.40		-3.48%	2,506.85	-9.18%
3.	Jan 31, 2019	$68.14		5.81%	2,704.10	7.87%
4.	Feb 28, 2019	$70.26	$0.36	3.64%	2,784.49	2.97%
5.	Mar 31, 2019	$74.34		5.81%	2,834.40	1.79%
6.	Apr 30, 2019	$77.68		4.49%	2,945.83	3.93%
7.	May 31, 2019	$76.06	$0.36	-1.62%	2,752.06	-6.58%
8.	Jun 30, 2019	$83.83		10.22%	2,941.76	6.89%
9.	Jul 31, 2019	$94.69		12.95%	2,980.38	1.31%
10.	Aug 31, 2019	$96.56	$0.36	2.36%	2,926.46	-1.81%
11.	Sep 30, 2019	$88.42		-8.43%	2,976.74	1.72%
12.	Oct 31, 2019	$84.56		-4.37%	3,037.56	2.04%
13.	Nov 30, 2019	$85.43	$0.41	1.51%	3,140.98	3.40%
14.	Dec 31, 2019	$87.92		2.91%	3,230.78	2.86%
15.	Jan 31, 2020	$84.83		-3.51%	3,225.52	-0.16%
16.	Feb 29, 2020	$78.43	$0.41	-7.06%	2,954.22	-8.41%
17.	Mar 31, 2020	$65.74		-16.18%	2,584.59	-12.51%
18.	Apr 30, 2020	$76.73		16.72%	2,912.43	12.68%
19.	May 31, 2020	$77.99	$0.41	2.18%	3,044.31	4.53%
20.	Jun 30, 2020	$73.59		-5.64%	3,100.29	1.84%
21.	Jul 31, 2020	$76.53		4.00%	3,271.12	5.51%
22.	Aug 31, 2020	$84.47	$0.41	10.91%	3,500.31	7.01%
23.	Sep 30, 2020	$85.92		1.72%	3,363.00	-3.92%
24.	Oct 31, 2020	$86.96		1.21%	3,269.96	-2.77%
25.	Nov 30, 2020	$98.02	$0.45	13.24%	3,621.63	10.75%
26.	Dec 31, 2020	$106.98		9.14%	3,756.07	3.71%
27.	Jan 31, 2021	$96.81		-9.51%	3,714.24	-1.11%
28.	Feb 28, 2021	$108.03	$0.45	12.05%	3,811.15	2.61%
29.	Mar 31, 2021	$109.27		1.15%	3,972.89	4.24%
30.	Apr 30, 2021	$114.49		4.78%	4,181.17	5.24%
31.	May 31, 2021	$113.88	$0.45	-0.14%	4,204.11	0.55%
32.	Jun 30, 2021	$111.81		-1.82%	4,297.50	2.22%
33.	Jul 31, 2021	$121.43		8.60%	4,395.26	2.27%
34.	Aug 31, 2021	$117.49	$0.45	-2.87%	4,522.68	2.90%
35.	Sep 30, 2021	$110.31		-6.11%	4,307.54	-4.76%
36.	Oct 31, 2021	$106.07		-3.84%	4,605.38	6.91%
37.	Nov 30, 2021	$109.64	$0.49	3.83%	4,567.00	-0.83%
38.	Dec 31, 2021	$116.97		6.69%	4,766.18	4.36%
39.	Jan 31, 2022	$98.32		-15.94%	4,515.55	-5.26%
40.	Feb 28, 2022	$91.79	$0.49	-6.14%	4,373.94	-3.14%
41.	Mar 31, 2022	$90.97		-0.89%	4,530.41	3.58%
42.	Apr 30, 2022	$74.64		-17.95%	4,131.93	-8.80%
43.	May 31, 2022	$78.50	$0.49	5.83%	4,132.15	0.01%
44.	Jun 30, 2022	$76.39		-2.69%	3,785.38	-8.39%
45.	Jul 31, 2022	$84.78		10.98%	4,130.29	9.11%
46.	Aug 31, 2022	$84.07	$0.49	-0.26%	3,955.00	-4.24%
47.	Sep 30, 2022	$84.26		0.23%	3,585.62	-9.34%
48.	Oct 31, 2022	$86.59		2.77%	3,871.98	7.99%
49.	Nov 30, 2022	$102.20	$0.53	18.64%	4,080.11	5.38%
50.	Dec 31, 2022	$99.20		-2.94%	3,839.50	-5.90%
51.	Jan 31, 2023	$109.14		10.02%	4,076.60	6.18%
52.	Feb 28, 2023	$102.09	$0.53	-5.97%	3,970.15	-2.61%
53.	Mar 31, 2023	$104.13		2.00%	4,109.31	3.51%
54.	Apr 30, 2023	$114.29		9.76%	4,169.48	1.46%
55.	May 31, 2023	$97.64	$0.53	-14.10%	4,179.83	0.25%
56.	Jun 30, 2023	$99.06		1.45%	4,376.86	4.71%
57.	Jul 31, 2023	$101.57		2.53%	4,588.96	4.85%
58.	Aug 31, 2023	$97.44	$0.53	-3.54%	4,507.66	-1.77%
59.	Sep 30, 2023	$91.27		-6.33%	4,288.05	-4.87%
60.	Oct 31, 2023	$92.24		1.06%	4,193.80	-2.20%
61.	Nov 30, 2023	$99.30	$0.57	8.27%	4,567.80	8.92%
62.	Dec 31, 2023	$96.01		-3.31%	4,769.83	4.42%
63.	Jan 31, 2024	$93.03		-3.10%	4,845.65	1.59%
64.	Feb 29, 2024	$94.90	$0.57	2.62%	5,096.27	5.17%
65.	Mar 31, 2024	$91.39		-3.70%	5,254.35	3.10%
66.	Apr 30, 2024	$88.49		-3.17%	5,035.69	-4.16%
67.	May 31, 2024	$80.22	$0.57	-8.70%	5,277.51	4.80%
68.	Jun 30, 2024	$77.85		-2.95%	5,460.48	3.47%
69.	Jul 31, 2024	$77.95		0.13%	5,522.30	1.13%
70.	Aug 31, 2024	$94.57	$0.57	22.05%	5,648.40	2.28%
71.	Sep 30, 2024	$97.49		3.09%	5,762.48	2.02%
Average (R):				1.21%		1.20%
Standard deviation:				7.97%		5.15%

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 SBUX during period t

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

Variance and Covariance

Starbucks Corp., calculation of variance and covariance of returns

t	Date	R_SBUX,t	R_{S&P 500,t}	(R_SBUX,t–R_SBUX)²	(R_{S&P 500,t}–R_{S&P 500})²	(R_SBUX,t–R_SBUX)×(R_{S&P 500,t}–R_{S&P 500})
1.	Nov 30, 2018	15.12%	1.79%	193.37	0.34	8.16
2.	Dec 31, 2018	-3.48%	-9.18%	22.00	107.68	48.67
3.	Jan 31, 2019	5.81%	7.87%	21.11	44.48	30.64
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70.	Aug 31, 2024	22.05%	2.28%	434.27	1.18	22.60
71.	Sep 30, 2024	3.09%	2.02%	3.51	0.67	1.54
Total (Σ):				4,450.55	1,855.59	1,712.68

t	Date	R_SBUX,t	R_{S&P 500,t}	(R_SBUX,t–R_SBUX)²	(R_{S&P 500,t}–R_{S&P 500})²	(R_SBUX,t–R_SBUX)×(R_{S&P 500,t}–R_{S&P 500})
1.	Nov 30, 2018	15.12%	1.79%	193.37	0.34	8.16
2.	Dec 31, 2018	-3.48%	-9.18%	22.00	107.68	48.67
3.	Jan 31, 2019	5.81%	7.87%	21.11	44.48	30.64
4.	Feb 28, 2019	3.64%	2.97%	5.89	3.15	4.30
5.	Mar 31, 2019	5.81%	1.79%	21.10	0.35	2.73
6.	Apr 30, 2019	4.49%	3.93%	10.75	7.47	8.96
7.	May 31, 2019	-1.62%	-6.58%	8.04	60.48	22.05
8.	Jun 30, 2019	10.22%	6.89%	81.04	32.42	51.26
9.	Jul 31, 2019	12.95%	1.31%	137.86	0.01	1.34
10.	Aug 31, 2019	2.36%	-1.81%	1.30	9.05	-3.43
11.	Sep 30, 2019	-8.43%	1.72%	93.00	0.27	-5.01
12.	Oct 31, 2019	-4.37%	2.04%	31.12	0.71	-4.71
13.	Nov 30, 2019	1.51%	3.40%	0.09	4.87	0.66
14.	Dec 31, 2019	2.91%	2.86%	2.89	2.76	2.82
15.	Jan 31, 2020	-3.51%	-0.16%	22.35	1.85	6.44
16.	Feb 29, 2020	-7.06%	-8.41%	68.47	92.35	79.52
17.	Mar 31, 2020	-16.18%	-12.51%	302.53	187.99	238.48
18.	Apr 30, 2020	16.72%	12.68%	240.37	131.91	178.07
19.	May 31, 2020	2.18%	4.53%	0.93	11.08	3.21
20.	Jun 30, 2020	-5.64%	1.84%	46.99	0.41	-4.39
21.	Jul 31, 2020	4.00%	5.51%	7.74	18.59	11.99
22.	Aug 31, 2020	10.91%	7.01%	94.04	33.73	56.32
23.	Sep 30, 2020	1.72%	-3.92%	0.25	26.23	-2.58
24.	Oct 31, 2020	1.21%	-2.77%	0.00	15.73	0.01
25.	Nov 30, 2020	13.24%	10.75%	144.54	91.31	114.88
26.	Dec 31, 2020	9.14%	3.71%	62.85	6.32	19.92
27.	Jan 31, 2021	-9.51%	-1.11%	114.92	5.35	24.79
28.	Feb 28, 2021	12.05%	2.61%	117.53	1.99	15.29
29.	Mar 31, 2021	1.15%	4.24%	0.00	9.27	-0.20
30.	Apr 30, 2021	4.78%	5.24%	12.70	16.35	14.41
31.	May 31, 2021	-0.14%	0.55%	1.83	0.42	0.88
32.	Jun 30, 2021	-1.82%	2.22%	9.19	1.05	-3.10
33.	Jul 31, 2021	8.60%	2.27%	54.62	1.16	7.95
34.	Aug 31, 2021	-2.87%	2.90%	16.71	2.89	-6.95
35.	Sep 30, 2021	-6.11%	-4.76%	53.65	35.47	43.62
36.	Oct 31, 2021	-3.84%	6.91%	25.57	32.67	-28.90
37.	Nov 30, 2021	3.83%	-0.83%	6.83	4.13	-5.31
38.	Dec 31, 2021	6.69%	4.36%	29.94	10.00	17.30
39.	Jan 31, 2022	-15.94%	-5.26%	294.39	41.70	110.80
40.	Feb 28, 2022	-6.14%	-3.14%	54.12	18.79	31.89
41.	Mar 31, 2022	-0.89%	3.58%	4.44	5.66	-5.01
42.	Apr 30, 2022	-17.95%	-8.80%	367.27	99.89	191.54
43.	May 31, 2022	5.83%	0.01%	21.29	1.42	-5.51
44.	Jun 30, 2022	-2.69%	-8.39%	15.22	91.99	37.42
45.	Jul 31, 2022	10.98%	9.11%	95.45	62.61	77.30
46.	Aug 31, 2022	-0.26%	-4.24%	2.17	29.63	8.02
47.	Sep 30, 2022	0.23%	-9.34%	0.97	111.06	10.41
48.	Oct 31, 2022	2.77%	7.99%	2.41	46.07	10.53
49.	Nov 30, 2022	18.64%	5.38%	303.67	17.44	72.78
50.	Dec 31, 2022	-2.94%	-5.90%	17.21	50.36	29.44
51.	Jan 31, 2023	10.02%	6.18%	77.56	24.76	43.82
52.	Feb 28, 2023	-5.97%	-2.61%	51.66	14.52	27.39
53.	Mar 31, 2023	2.00%	3.51%	0.62	5.32	1.81
54.	Apr 30, 2023	9.76%	1.46%	72.99	0.07	2.27
55.	May 31, 2023	-14.10%	0.25%	234.64	0.90	14.56
56.	Jun 30, 2023	1.45%	4.71%	0.06	12.35	0.85
57.	Jul 31, 2023	2.53%	4.85%	1.74	13.30	4.82
58.	Aug 31, 2023	-3.54%	-1.77%	22.64	8.82	14.13
59.	Sep 30, 2023	-6.33%	-4.87%	56.93	36.86	45.81
60.	Oct 31, 2023	1.06%	-2.20%	0.02	11.54	0.51
61.	Nov 30, 2023	8.27%	8.92%	49.82	59.58	54.48
62.	Dec 31, 2023	-3.31%	4.42%	20.49	10.39	-14.59
63.	Jan 31, 2024	-3.10%	1.59%	18.64	0.15	-1.69
64.	Feb 29, 2024	2.62%	5.17%	1.99	15.79	5.60
65.	Mar 31, 2024	-3.70%	3.10%	24.13	3.62	-9.35
66.	Apr 30, 2024	-3.17%	-4.16%	19.24	28.73	23.51
67.	May 31, 2024	-8.70%	4.80%	98.31	12.98	-35.72
68.	Jun 30, 2024	-2.95%	3.47%	17.37	5.14	-9.45
69.	Jul 31, 2024	0.13%	1.13%	1.18	0.00	0.07
70.	Aug 31, 2024	22.05%	2.28%	434.27	1.18	22.60
71.	Sep 30, 2024	3.09%	2.02%	3.51	0.67	1.54
Total (Σ):				4,450.55	1,855.59	1,712.68

Show all

Variance_SBUX = Σ(R_SBUX,t–R_SBUX)² ÷ (71 – 1)
= 4,450.55 ÷ (71 – 1)
= 63.58

Variance_{S&P 500} = Σ(R_{S&P 500,t}–R_{S&P 500})² ÷ (71 – 1)
= 1,855.59 ÷ (71 – 1)
= 26.51

Covariance_{SBUX, S&P 500} = Σ(R_SBUX,t–R_SBUX)×(R_{S&P 500,t}–R_{S&P 500}) ÷ (71 – 1)
= 1,712.68 ÷ (71 – 1)
= 24.47

Systematic Risk (β) Estimation

Variance_SBUX	63.58
Variance_{S&P 500}	26.51
Covariance_{SBUX, S&P 500}	24.47
Correlation coefficient_{SBUX, S&P 500}¹	0.60
β_SBUX²	0.92
α_SBUX³	0.11%

Calculations

¹ Correlation coefficient_{SBUX, S&P 500}
= Covariance_{SBUX, S&P 500} ÷ (Standard deviation_SBUX × Standard deviation_{S&P 500})
= 24.47 ÷ (7.97% × 5.15%)
= 0.60

² β_SBUX
= Covariance_{SBUX, S&P 500} ÷ Variance_{S&P 500}
= 24.47 ÷ 26.51
= 0.92

³ α_SBUX
= Average_SBUX – β_SBUX × Average_{S&P 500}
= 1.21% – 0.92 × 1.20%
= 0.11%

Expected Rate of Return

Assumptions
Rate of return on LT Treasury Composite¹	R_F	4.90%
Expected rate of return on market portfolio²	E(R_M)	13.86%
Systematic risk (β) of Starbucks Corp. common stock	β_SBUX	0.92

Expected rate of return on Starbucks Corp. common stock³	E(R_SBUX)	13.17%

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_SBUX) = R_F + β_SBUX [E(R_M) – R_F]
= 4.90% + 0.92 [13.86% – 4.90%]
= 13.17%