Deckers Outdoor Corp. (NYSE:DECK)

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 Deckers Outdoor Corp. common stock.

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

Rates of Return

Deckers Outdoor Corp., monthly rates of return

		Deckers Outdoor Corp. (DECK)			Standard & Poor’s 500 (S&P 500)
t	Date	Price_DECK,t¹	Dividend_DECK,t¹	R_DECK,t²	Price_{S&P 500,t}	R_{S&P 500,t}³
	Apr 30, 2017	$59.59			2,384.20
1.	May 31, 2017	$69.36		16.40%	2,411.80	1.16%
2.	Jun 30, 2017	$68.26		-1.59%	2,423.41	0.48%
3.	Jul 31, 2017	$64.86		-4.98%	2,470.30	1.93%
.	.	.	.	.	.	.
.	.	.	.	.	.	.
.	.	.	.	.	.	.
70.	Feb 28, 2023	$416.35		-2.60%	3,970.15	-2.61%
71.	Mar 31, 2023	$449.55		7.97%	4,109.31	3.51%
Average (R):				3.26%		0.90%
Standard deviation:				8.81%		5.03%

		Deckers Outdoor Corp. (DECK)			Standard & Poor’s 500 (S&P 500)
t	Date	Price_DECK,t¹	Dividend_DECK,t¹	R_DECK,t²	Price_{S&P 500,t}	R_{S&P 500,t}³
	Apr 30, 2017	$59.59			2,384.20
1.	May 31, 2017	$69.36		16.40%	2,411.80	1.16%
2.	Jun 30, 2017	$68.26		-1.59%	2,423.41	0.48%
3.	Jul 31, 2017	$64.86		-4.98%	2,470.30	1.93%
4.	Aug 31, 2017	$63.90		-1.48%	2,471.65	0.05%
5.	Sep 30, 2017	$68.41		7.06%	2,519.36	1.93%
6.	Oct 31, 2017	$68.24		-0.25%	2,575.26	2.22%
7.	Nov 30, 2017	$74.73		9.51%	2,647.58	2.81%
8.	Dec 31, 2017	$80.25		7.39%	2,673.61	0.98%
9.	Jan 31, 2018	$85.71		6.80%	2,823.81	5.62%
10.	Feb 28, 2018	$94.58		10.35%	2,713.83	-3.89%
11.	Mar 31, 2018	$90.03		-4.81%	2,640.87	-2.69%
12.	Apr 30, 2018	$93.26		3.59%	2,648.05	0.27%
13.	May 31, 2018	$113.16		21.34%	2,705.27	2.16%
14.	Jun 30, 2018	$112.89		-0.24%	2,718.37	0.48%
15.	Jul 31, 2018	$112.83		-0.05%	2,816.29	3.60%
16.	Aug 31, 2018	$121.84		7.99%	2,901.52	3.03%
17.	Sep 30, 2018	$118.58		-2.68%	2,913.98	0.43%
18.	Oct 31, 2018	$127.17		7.24%	2,711.74	-6.94%
19.	Nov 30, 2018	$133.24		4.77%	2,760.17	1.79%
20.	Dec 31, 2018	$127.95		-3.97%	2,506.85	-9.18%
21.	Jan 31, 2019	$128.45		0.39%	2,704.10	7.87%
22.	Feb 28, 2019	$147.95		15.18%	2,784.49	2.97%
23.	Mar 31, 2019	$146.99		-0.65%	2,834.40	1.79%
24.	Apr 30, 2019	$158.21		7.63%	2,945.83	3.93%
25.	May 31, 2019	$152.10		-3.86%	2,752.06	-6.58%
26.	Jun 30, 2019	$175.97		15.69%	2,941.76	6.89%
27.	Jul 31, 2019	$156.28		-11.19%	2,980.38	1.31%
28.	Aug 31, 2019	$147.45		-5.65%	2,926.46	-1.81%
29.	Sep 30, 2019	$147.36		-0.06%	2,976.74	1.72%
30.	Oct 31, 2019	$152.90		3.76%	3,037.56	2.04%
31.	Nov 30, 2019	$168.18		9.99%	3,140.98	3.40%
32.	Dec 31, 2019	$168.86		0.40%	3,230.78	2.86%
33.	Jan 31, 2020	$190.91		13.06%	3,225.52	-0.16%
34.	Feb 29, 2020	$173.80		-8.96%	2,954.22	-8.41%
35.	Mar 31, 2020	$134.00		-22.90%	2,584.59	-12.51%
36.	Apr 30, 2020	$148.76		11.01%	2,912.43	12.68%
37.	May 31, 2020	$182.53		22.70%	3,044.31	4.53%
38.	Jun 30, 2020	$196.39		7.59%	3,100.29	1.84%
39.	Jul 31, 2020	$209.25		6.55%	3,271.12	5.51%
40.	Aug 31, 2020	$203.87		-2.57%	3,500.31	7.01%
41.	Sep 30, 2020	$220.01		7.92%	3,363.00	-3.92%
42.	Oct 31, 2020	$253.37		15.16%	3,269.96	-2.77%
43.	Nov 30, 2020	$254.59		0.48%	3,621.63	10.75%
44.	Dec 31, 2020	$286.78		12.64%	3,756.07	3.71%
45.	Jan 31, 2021	$291.98		1.81%	3,714.24	-1.11%
46.	Feb 28, 2021	$326.11		11.69%	3,811.15	2.61%
47.	Mar 31, 2021	$330.42		1.32%	3,972.89	4.24%
48.	Apr 30, 2021	$338.20		2.35%	4,181.17	5.24%
49.	May 31, 2021	$335.44		-0.82%	4,204.11	0.55%
50.	Jun 30, 2021	$384.07		14.50%	4,297.50	2.22%
51.	Jul 31, 2021	$410.85		6.97%	4,395.26	2.27%
52.	Aug 31, 2021	$418.45		1.85%	4,522.68	2.90%
53.	Sep 30, 2021	$360.20		-13.92%	4,307.54	-4.76%
54.	Oct 31, 2021	$395.31		9.75%	4,605.38	6.91%
55.	Nov 30, 2021	$405.40		2.55%	4,567.00	-0.83%
56.	Dec 31, 2021	$366.31		-9.64%	4,766.18	4.36%
57.	Jan 31, 2022	$320.23		-12.58%	4,515.55	-5.26%
58.	Feb 28, 2022	$288.64		-9.86%	4,373.94	-3.14%
59.	Mar 31, 2022	$273.77		-5.15%	4,530.41	3.58%
60.	Apr 30, 2022	$265.75		-2.93%	4,131.93	-8.80%
61.	May 31, 2022	$268.56		1.06%	4,132.15	0.01%
62.	Jun 30, 2022	$255.35		-4.92%	3,785.38	-8.39%
63.	Jul 31, 2022	$313.21		22.66%	4,130.29	9.11%
64.	Aug 31, 2022	$321.57		2.67%	3,955.00	-4.24%
65.	Sep 30, 2022	$312.61		-2.79%	3,585.62	-9.34%
66.	Oct 31, 2022	$349.93		11.94%	3,871.98	7.99%
67.	Nov 30, 2022	$398.88		13.99%	4,080.11	5.38%
68.	Dec 31, 2022	$399.16		0.07%	3,839.50	-5.90%
69.	Jan 31, 2023	$427.48		7.09%	4,076.60	6.18%
70.	Feb 28, 2023	$416.35		-2.60%	3,970.15	-2.61%
71.	Mar 31, 2023	$449.55		7.97%	4,109.31	3.51%
Average (R):				3.26%		0.90%
Standard deviation:				8.81%		5.03%

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 DECK during period t

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

Variance and Covariance

Deckers Outdoor Corp., calculation of variance and covariance of returns

t	Date	R_DECK,t	R_{S&P 500,t}	(R_DECK,t–R_DECK)²	(R_{S&P 500,t}–R_{S&P 500})²	(R_DECK,t–R_DECK)×(R_{S&P 500,t}–R_{S&P 500})
1.	May 31, 2017	16.40%	1.16%	172.43	0.07	3.44
2.	Jun 30, 2017	-1.59%	0.48%	23.52	0.17	2.01
3.	Jul 31, 2017	-4.98%	1.93%	67.98	1.08	-8.57
.	.	.	.	.	.	.
.	.	.	.	.	.	.
.	.	.	.	.	.	.
70.	Feb 28, 2023	-2.60%	-2.61%	34.43	12.30	20.58
71.	Mar 31, 2023	7.97%	3.51%	22.18	6.81	12.29
Total (Σ):				5,438.60	1,772.37	1,590.05

t	Date	R_DECK,t	R_{S&P 500,t}	(R_DECK,t–R_DECK)²	(R_{S&P 500,t}–R_{S&P 500})²	(R_DECK,t–R_DECK)×(R_{S&P 500,t}–R_{S&P 500})
1.	May 31, 2017	16.40%	1.16%	172.43	0.07	3.44
2.	Jun 30, 2017	-1.59%	0.48%	23.52	0.17	2.01
3.	Jul 31, 2017	-4.98%	1.93%	67.98	1.08	-8.57
4.	Aug 31, 2017	-1.48%	0.05%	22.51	0.71	3.99
5.	Sep 30, 2017	7.06%	1.93%	14.39	1.07	3.93
6.	Oct 31, 2017	-0.25%	2.22%	12.34	1.75	-4.65
7.	Nov 30, 2017	9.51%	2.81%	39.02	3.66	11.95
8.	Dec 31, 2017	7.39%	0.98%	16.99	0.01	0.36
9.	Jan 31, 2018	6.80%	5.62%	12.53	22.30	16.71
10.	Feb 28, 2018	10.35%	-3.89%	50.19	22.95	-33.94
11.	Mar 31, 2018	-4.81%	-2.69%	65.20	12.85	28.94
12.	Apr 30, 2018	3.59%	0.27%	0.10	0.39	-0.20
13.	May 31, 2018	21.34%	2.16%	326.67	1.60	22.87
14.	Jun 30, 2018	-0.24%	0.48%	12.27	0.17	1.44
15.	Jul 31, 2018	-0.05%	3.60%	11.00	7.33	-8.98
16.	Aug 31, 2018	7.99%	3.03%	22.29	4.54	10.06
17.	Sep 30, 2018	-2.68%	0.43%	35.28	0.22	2.77
18.	Oct 31, 2018	7.24%	-6.94%	15.84	61.40	-31.19
19.	Nov 30, 2018	4.77%	1.79%	2.28	0.79	1.34
20.	Dec 31, 2018	-3.97%	-9.18%	52.34	101.47	72.87
21.	Jan 31, 2019	0.39%	7.87%	8.26	48.62	-20.04
22.	Feb 28, 2019	15.18%	2.97%	142.01	4.32	24.75
23.	Mar 31, 2019	-0.65%	1.79%	15.31	0.80	-3.51
24.	Apr 30, 2019	7.63%	3.93%	19.09	9.22	13.26
25.	May 31, 2019	-3.86%	-6.58%	50.78	55.85	53.26
26.	Jun 30, 2019	15.69%	6.89%	154.49	35.97	74.54
27.	Jul 31, 2019	-11.19%	1.31%	208.91	0.17	-6.03
28.	Aug 31, 2019	-5.65%	-1.81%	79.46	7.32	24.11
29.	Sep 30, 2019	-0.06%	1.72%	11.06	0.68	-2.74
30.	Oct 31, 2019	3.76%	2.04%	0.25	1.32	0.57
31.	Nov 30, 2019	9.99%	3.40%	45.28	6.30	16.88
32.	Dec 31, 2019	0.40%	2.86%	8.18	3.85	-5.61
33.	Jan 31, 2020	13.06%	-0.16%	95.92	1.12	-10.37
34.	Feb 29, 2020	-8.96%	-8.41%	149.49	86.61	113.79
35.	Mar 31, 2020	-22.90%	-12.51%	684.56	179.76	350.80
36.	Apr 30, 2020	11.01%	12.68%	60.07	138.98	91.37
37.	May 31, 2020	22.70%	4.53%	377.79	13.20	70.61
38.	Jun 30, 2020	7.59%	1.84%	18.74	0.89	4.08
39.	Jul 31, 2020	6.55%	5.51%	10.78	21.29	15.15
40.	Aug 31, 2020	-2.57%	7.01%	34.05	37.34	-35.66
41.	Sep 30, 2020	7.92%	-3.92%	21.65	23.22	-22.42
42.	Oct 31, 2020	15.16%	-2.77%	141.58	13.41	-43.58
43.	Nov 30, 2020	0.48%	10.75%	7.74	97.20	-27.43
44.	Dec 31, 2020	12.64%	3.71%	87.98	7.93	26.42
45.	Jan 31, 2021	1.81%	-1.11%	2.11	4.04	2.92
46.	Feb 28, 2021	11.69%	2.61%	70.98	2.94	14.44
47.	Mar 31, 2021	1.32%	4.24%	3.77	11.21	-6.50
48.	Apr 30, 2021	2.35%	5.24%	0.83	18.90	-3.95
49.	May 31, 2021	-0.82%	0.55%	16.65	0.12	1.42
50.	Jun 30, 2021	14.50%	2.22%	126.18	1.76	14.89
51.	Jul 31, 2021	6.97%	2.27%	13.75	1.90	5.11
52.	Aug 31, 2021	1.85%	2.90%	2.00	4.01	-2.83
53.	Sep 30, 2021	-13.92%	-4.76%	295.31	31.95	97.14
54.	Oct 31, 2021	9.75%	6.91%	42.03	36.23	39.02
55.	Nov 30, 2021	2.55%	-0.83%	0.51	2.99	1.23
56.	Dec 31, 2021	-9.64%	4.36%	166.58	12.01	-44.73
57.	Jan 31, 2022	-12.58%	-5.26%	251.02	37.87	97.50
58.	Feb 28, 2022	-9.86%	-3.14%	172.37	16.25	52.93
59.	Mar 31, 2022	-5.15%	3.58%	70.83	7.19	-22.57
60.	Apr 30, 2022	-2.93%	-8.80%	38.36	93.92	60.02
61.	May 31, 2022	1.06%	0.01%	4.87	0.79	1.96
62.	Jun 30, 2022	-4.92%	-8.39%	66.96	86.26	76.00
63.	Jul 31, 2022	22.66%	9.11%	376.16	67.50	159.35
64.	Aug 31, 2022	2.67%	-4.24%	0.35	26.42	3.06
65.	Sep 30, 2022	-2.79%	-9.34%	36.61	104.76	61.93
66.	Oct 31, 2022	11.94%	7.99%	75.24	50.28	61.51
67.	Nov 30, 2022	13.99%	5.38%	115.01	20.07	48.04
68.	Dec 31, 2022	0.07%	-5.90%	10.20	46.14	21.70
69.	Jan 31, 2023	7.09%	6.18%	14.67	27.87	20.22
70.	Feb 28, 2023	-2.60%	-2.61%	34.43	12.30	20.58
71.	Mar 31, 2023	7.97%	3.51%	22.18	6.81	12.29
Total (Σ):				5,438.60	1,772.37	1,590.05

Show all

Variance_DECK = Σ(R_DECK,t–R_DECK)² ÷ (71 – 1)
= 5,438.60 ÷ (71 – 1)
= 77.69

Variance_{S&P 500} = Σ(R_{S&P 500,t}–R_{S&P 500})² ÷ (71 – 1)
= 1,772.37 ÷ (71 – 1)
= 25.32

Covariance_{DECK, S&P 500} = Σ(R_DECK,t–R_DECK)×(R_{S&P 500,t}–R_{S&P 500}) ÷ (71 – 1)
= 1,590.05 ÷ (71 – 1)
= 22.72

Systematic Risk (β) Estimation

Variance_DECK	77.69
Variance_{S&P 500}	25.32
Covariance_{DECK, S&P 500}	22.72
Correlation coefficient_{DECK, S&P 500}¹	0.51
β_DECK²	0.90
α_DECK³	2.46%

Calculations

¹ Correlation coefficient_{DECK, S&P 500}
= Covariance_{DECK, S&P 500} ÷ (Standard deviation_DECK × Standard deviation_{S&P 500})
= 22.72 ÷ (8.81% × 5.03%)
= 0.51

² β_DECK
= Covariance_{DECK, S&P 500} ÷ Variance_{S&P 500}
= 22.72 ÷ 25.32
= 0.90

³ α_DECK
= Average_DECK – β_DECK × Average_{S&P 500}
= 3.26% – 0.90 × 0.90%
= 2.46%

Expected Rate of Return

Assumptions
Rate of return on LT Treasury Composite¹	R_F	4.67%
Expected rate of return on market portfolio²	E(R_M)	13.79%
Systematic risk (β) of Deckers Outdoor Corp. common stock	β_DECK	0.90

Expected rate of return on Deckers Outdoor Corp. common stock³	E(R_DECK)	12.85%

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_DECK) = R_F + β_DECK [E(R_M) – R_F]
= 4.67% + 0.90 [13.79% – 4.67%]
= 12.85%