Yahoo! Inc. (NASDAQ:YHOO)

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 Yahoo! Inc. common stock.

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

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Rates of Return

Yahoo! Inc., monthly rates of return

		Yahoo! Inc. (YHOO)			Standard & Poor’s 500 (S&P 500)
t	Date	Price_YHOO,t¹	Dividend_YHOO,t¹	R_YHOO,t²	Price_{S&P 500,t}	R_{S&P 500,t}³
	Jan 31, 2012
1.	Feb 29, 2012
2.	Mar 31, 2012
3.	Apr 30, 2012
.	.	.	.	.	.	.
.	.	.	.	.	.	.
.	.	.	.	.	.	.
58.	Nov 30, 2016
59.	Dec 31, 2016
Average (R):
Standard deviation:

		Yahoo! Inc. (YHOO)			Standard & Poor’s 500 (S&P 500)
t	Date	Price_YHOO,t¹	Dividend_YHOO,t¹	R_YHOO,t²	Price_{S&P 500,t}	R_{S&P 500,t}³
	Jan 31, 2012
1.	Feb 29, 2012
2.	Mar 31, 2012
3.	Apr 30, 2012
4.	May 31, 2012
5.	Jun 30, 2012
6.	Jul 31, 2012
7.	Aug 31, 2012
8.	Sep 30, 2012
9.	Oct 31, 2012
10.	Nov 30, 2012
11.	Dec 31, 2012
12.	Jan 31, 2013
13.	Feb 28, 2013
14.	Mar 31, 2013
15.	Apr 30, 2013
16.	May 31, 2013
17.	Jun 30, 2013
18.	Jul 31, 2013
19.	Aug 31, 2013
20.	Sep 30, 2013
21.	Oct 31, 2013
22.	Nov 30, 2013
23.	Dec 31, 2013
24.	Jan 31, 2014
25.	Feb 28, 2014
26.	Mar 31, 2014
27.	Apr 30, 2014
28.	May 31, 2014
29.	Jun 30, 2014
30.	Jul 31, 2014
31.	Aug 31, 2014
32.	Sep 30, 2014
33.	Oct 31, 2014
34.	Nov 30, 2014
35.	Dec 31, 2014
36.	Jan 31, 2015
37.	Feb 28, 2015
38.	Mar 31, 2015
39.	Apr 30, 2015
40.	May 31, 2015
41.	Jun 30, 2015
42.	Jul 31, 2015
43.	Aug 31, 2015
44.	Sep 30, 2015
45.	Oct 31, 2015
46.	Nov 30, 2015
47.	Dec 31, 2015
48.	Jan 31, 2016
49.	Feb 29, 2016
50.	Mar 31, 2016
51.	Apr 30, 2016
52.	May 31, 2016
53.	Jun 30, 2016
54.	Jul 31, 2016
55.	Aug 31, 2016
56.	Sep 30, 2016
57.	Oct 31, 2016
58.	Nov 30, 2016
59.	Dec 31, 2016
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 YHOO during period t

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

Variance and Covariance

Yahoo! Inc., calculation of variance and covariance of returns

t	Date	R_YHOO,t	R_{S&P 500,t}	(R_YHOO,t–R_YHOO)²	(R_{S&P 500,t}–R_{S&P 500})²	(R_YHOO,t–R_YHOO)×(R_{S&P 500,t}–R_{S&P 500})
1.	Feb 29, 2012
2.	Mar 31, 2012
3.	Apr 30, 2012
.	.	.	.	.	.	.
.	.	.	.	.	.	.
.	.	.	.	.	.	.
58.	Nov 30, 2016
59.	Dec 31, 2016
Total (Σ):

t	Date	R_YHOO,t	R_{S&P 500,t}	(R_YHOO,t–R_YHOO)²	(R_{S&P 500,t}–R_{S&P 500})²	(R_YHOO,t–R_YHOO)×(R_{S&P 500,t}–R_{S&P 500})
1.	Feb 29, 2012
2.	Mar 31, 2012
3.	Apr 30, 2012
4.	May 31, 2012
5.	Jun 30, 2012
6.	Jul 31, 2012
7.	Aug 31, 2012
8.	Sep 30, 2012
9.	Oct 31, 2012
10.	Nov 30, 2012
11.	Dec 31, 2012
12.	Jan 31, 2013
13.	Feb 28, 2013
14.	Mar 31, 2013
15.	Apr 30, 2013
16.	May 31, 2013
17.	Jun 30, 2013
18.	Jul 31, 2013
19.	Aug 31, 2013
20.	Sep 30, 2013
21.	Oct 31, 2013
22.	Nov 30, 2013
23.	Dec 31, 2013
24.	Jan 31, 2014
25.	Feb 28, 2014
26.	Mar 31, 2014
27.	Apr 30, 2014
28.	May 31, 2014
29.	Jun 30, 2014
30.	Jul 31, 2014
31.	Aug 31, 2014
32.	Sep 30, 2014
33.	Oct 31, 2014
34.	Nov 30, 2014
35.	Dec 31, 2014
36.	Jan 31, 2015
37.	Feb 28, 2015
38.	Mar 31, 2015
39.	Apr 30, 2015
40.	May 31, 2015
41.	Jun 30, 2015
42.	Jul 31, 2015
43.	Aug 31, 2015
44.	Sep 30, 2015
45.	Oct 31, 2015
46.	Nov 30, 2015
47.	Dec 31, 2015
48.	Jan 31, 2016
49.	Feb 29, 2016
50.	Mar 31, 2016
51.	Apr 30, 2016
52.	May 31, 2016
53.	Jun 30, 2016
54.	Jul 31, 2016
55.	Aug 31, 2016
56.	Sep 30, 2016
57.	Oct 31, 2016
58.	Nov 30, 2016
59.	Dec 31, 2016
Total (Σ):

Show all

Variance_YHOO = Σ(R_YHOO,t–R_YHOO)² ÷ (59 – 1)
= ÷ (59 – 1)
=

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

Covariance_{YHOO, S&P 500} = Σ(R_YHOO,t–R_YHOO)×(R_{S&P 500,t}–R_{S&P 500}) ÷ (59 – 1)
= ÷ (59 – 1)
=

Systematic Risk (β) Estimation

Variance_YHOO
Variance_{S&P 500}
Covariance_{YHOO, S&P 500}
Correlation coefficient_{YHOO, S&P 500}¹
β_YHOO²
α_YHOO³

Calculations

¹ Correlation coefficient_{YHOO, S&P 500}
= Covariance_{YHOO, S&P 500} ÷ (Standard deviation_YHOO × Standard deviation_{S&P 500})
= ÷ ( × )
=

² β_YHOO
= Covariance_{YHOO, S&P 500} ÷ Variance_{S&P 500}
= ÷
=

³ α_YHOO
= Average_YHOO – β_YHOO × Average_{S&P 500}
= – ×
=

Expected Rate of Return

Assumptions
Rate of return on LT Treasury Composite¹	R_F
Expected rate of return on market portfolio²	E(R_M)
Systematic risk (β) of Yahoo! Inc. common stock	β_YHOO

Expected rate of return on Yahoo! Inc. common stock³	E(R_YHOO)

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_YHOO) = R_F + β_YHOO [E(R_M) – R_F]
= + [ – ]
=

	Yahoo! Inc.	Other companies (not purchased previously)
Financial Statements
Common-Size Financial Statements
Analysis of Financial Ratios
Relative Valuation
Discounted Cash Flow (DCF) Valuation
Long-term Trends
Analysis of Components of Financial Statements
Financial Reporting Quality
Stock Price Trends

	All companies
Financial Statements
Common-Size Financial Statements
Analysis of Financial Ratios
Relative Valuation
Discounted Cash Flow (DCF) Valuation
Long-term Trends
Analysis of Components of Financial Statements
Financial Reporting Quality
Stock Price Trends