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 Dell Technologies Inc. common stock.
Rates of Return
Dell Technologies Inc., monthly rates of return
| Dell Technologies Inc. (DELL) | Standard & Poor’s 500 (S&P 500) | |||||
|---|---|---|---|---|---|---|
| t | Date | PriceDELL,t1 | DividendDELL,t1 | RDELL,t2 | PriceS&P 500,t | RS&P 500,t3 |
| Dec 31, 2018 | $48.87 | 2,506.85 | ||||
| 1. | Jan 31, 2019 | $48.59 | -0.57% | 2,704.10 | 7.87% | |
| 2. | Feb 28, 2019 | $55.82 | 14.88% | 2,784.49 | 2.97% | |
| 3. | Mar 31, 2019 | $58.69 | 5.14% | 2,834.40 | 1.79% | |
| . | . | . | . | . | . | . |
| . | . | . | . | . | . | . |
| . | . | . | . | . | . | . |
| 60. | Dec 31, 2023 | $76.50 | 0.83% | 4,769.83 | 4.42% | |
| 61. | Jan 31, 2024 | $82.88 | $0.37 | 8.82% | 4,845.65 | 1.59% |
| Average (R): | 2.50% | 1.22% | ||||
| Standard deviation: | 9.21% | 5.29% | ||||
| Dell Technologies Inc. (DELL) | Standard & Poor’s 500 (S&P 500) | |||||
|---|---|---|---|---|---|---|
| t | Date | PriceDELL,t1 | DividendDELL,t1 | RDELL,t2 | PriceS&P 500,t | RS&P 500,t3 |
| Dec 31, 2018 | $48.87 | 2,506.85 | ||||
| 1. | Jan 31, 2019 | $48.59 | -0.57% | 2,704.10 | 7.87% | |
| 2. | Feb 28, 2019 | $55.82 | 14.88% | 2,784.49 | 2.97% | |
| 3. | Mar 31, 2019 | $58.69 | 5.14% | 2,834.40 | 1.79% | |
| 4. | Apr 30, 2019 | $67.41 | 14.86% | 2,945.83 | 3.93% | |
| 5. | May 31, 2019 | $59.55 | -11.66% | 2,752.06 | -6.58% | |
| 6. | Jun 30, 2019 | $50.80 | -14.69% | 2,941.76 | 6.89% | |
| 7. | Jul 31, 2019 | $57.74 | 13.66% | 2,980.38 | 1.31% | |
| 8. | Aug 31, 2019 | $51.53 | -10.76% | 2,926.46 | -1.81% | |
| 9. | Sep 30, 2019 | $51.86 | 0.64% | 2,976.74 | 1.72% | |
| 10. | Oct 31, 2019 | $52.89 | 1.99% | 3,037.56 | 2.04% | |
| 11. | Nov 30, 2019 | $48.49 | -8.32% | 3,140.98 | 3.40% | |
| 12. | Dec 31, 2019 | $51.39 | 5.98% | 3,230.78 | 2.86% | |
| 13. | Jan 31, 2020 | $48.77 | -5.10% | 3,225.52 | -0.16% | |
| 14. | Feb 29, 2020 | $40.46 | -17.04% | 2,954.22 | -8.41% | |
| 15. | Mar 31, 2020 | $39.55 | -2.25% | 2,584.59 | -12.51% | |
| 16. | Apr 30, 2020 | $42.69 | 7.94% | 2,912.43 | 12.68% | |
| 17. | May 31, 2020 | $49.64 | 16.28% | 3,044.31 | 4.53% | |
| 18. | Jun 30, 2020 | $54.94 | 10.68% | 3,100.29 | 1.84% | |
| 19. | Jul 31, 2020 | $59.83 | 8.90% | 3,271.12 | 5.51% | |
| 20. | Aug 31, 2020 | $66.08 | 10.45% | 3,500.31 | 7.01% | |
| 21. | Sep 30, 2020 | $67.69 | 2.44% | 3,363.00 | -3.92% | |
| 22. | Oct 31, 2020 | $60.26 | -10.98% | 3,269.96 | -2.77% | |
| 23. | Nov 30, 2020 | $69.03 | 14.55% | 3,621.63 | 10.75% | |
| 24. | Dec 31, 2020 | $73.29 | 6.17% | 3,756.07 | 3.71% | |
| 25. | Jan 31, 2021 | $72.89 | -0.55% | 3,714.24 | -1.11% | |
| 26. | Feb 28, 2021 | $81.07 | 11.22% | 3,811.15 | 2.61% | |
| 27. | Mar 31, 2021 | $88.15 | 8.73% | 3,972.89 | 4.24% | |
| 28. | Apr 30, 2021 | $98.33 | 11.55% | 4,181.17 | 5.24% | |
| 29. | May 31, 2021 | $98.64 | 0.32% | 4,204.11 | 0.55% | |
| 30. | Jun 30, 2021 | $99.67 | 1.04% | 4,297.50 | 2.22% | |
| 31. | Jul 31, 2021 | $96.62 | -3.06% | 4,395.26 | 2.27% | |
| 32. | Aug 31, 2021 | $97.46 | 0.87% | 4,522.68 | 2.90% | |
| 33. | Sep 30, 2021 | $104.04 | 6.75% | 4,307.54 | -4.76% | |
| 34. | Oct 31, 2021 | $109.99 | 5.72% | 4,605.38 | 6.91% | |
| 35. | Nov 30, 2021 | $56.47 | $54.85 | 1.21% | 4,567.00 | -0.83% |
| 36. | Dec 31, 2021 | $56.17 | -0.53% | 4,766.18 | 4.36% | |
| 37. | Jan 31, 2022 | $56.81 | 1.14% | 4,515.55 | -5.26% | |
| 38. | Feb 28, 2022 | $50.96 | -10.30% | 4,373.94 | -3.14% | |
| 39. | Mar 31, 2022 | $50.19 | -1.51% | 4,530.41 | 3.58% | |
| 40. | Apr 30, 2022 | $47.01 | $0.33 | -5.68% | 4,131.93 | -8.80% |
| 41. | May 31, 2022 | $49.94 | 6.23% | 4,132.15 | 0.01% | |
| 42. | Jun 30, 2022 | $46.21 | -7.47% | 3,785.38 | -8.39% | |
| 43. | Jul 31, 2022 | $45.06 | $0.33 | -1.77% | 4,130.29 | 9.11% |
| 44. | Aug 31, 2022 | $38.29 | -15.02% | 3,955.00 | -4.24% | |
| 45. | Sep 30, 2022 | $34.17 | -10.76% | 3,585.62 | -9.34% | |
| 46. | Oct 31, 2022 | $38.40 | $0.33 | 13.35% | 3,871.98 | 7.99% |
| 47. | Nov 30, 2022 | $44.79 | 16.64% | 4,080.11 | 5.38% | |
| 48. | Dec 31, 2022 | $40.22 | -10.20% | 3,839.50 | -5.90% | |
| 49. | Jan 31, 2023 | $40.62 | $0.33 | 1.82% | 4,076.60 | 6.18% |
| 50. | Feb 28, 2023 | $40.64 | 0.05% | 3,970.15 | -2.61% | |
| 51. | Mar 31, 2023 | $40.21 | -1.06% | 4,109.31 | 3.51% | |
| 52. | Apr 30, 2023 | $43.49 | $0.37 | 9.08% | 4,169.48 | 1.46% |
| 53. | May 31, 2023 | $44.81 | 3.04% | 4,179.83 | 0.25% | |
| 54. | Jun 30, 2023 | $54.11 | 20.75% | 4,376.86 | 4.71% | |
| 55. | Jul 31, 2023 | $52.92 | $0.37 | -1.52% | 4,588.96 | 4.85% |
| 56. | Aug 31, 2023 | $56.24 | 6.27% | 4,507.66 | -1.77% | |
| 57. | Sep 30, 2023 | $68.90 | 22.51% | 4,288.05 | -4.87% | |
| 58. | Oct 31, 2023 | $66.91 | $0.37 | -2.35% | 4,193.80 | -2.20% |
| 59. | Nov 30, 2023 | $75.87 | 13.39% | 4,567.80 | 8.92% | |
| 60. | Dec 31, 2023 | $76.50 | 0.83% | 4,769.83 | 4.42% | |
| 61. | Jan 31, 2024 | $82.88 | $0.37 | 8.82% | 4,845.65 | 1.59% |
| Average (R): | 2.50% | 1.22% | ||||
| Standard deviation: | 9.21% | 5.29% | ||||
Show all
1 Data in US$ per share of common stock, adjusted for splits and stock dividends.
2 Rate of return on common stock of DELL during period t
3 Rate of return on S&P 500 (the market portfolio proxy) during period t
Variance and Covariance
Dell Technologies Inc., calculation of variance and covariance of returns
| t | Date | RDELL,t | RS&P 500,t | (RDELL,t–RDELL)2 | (RS&P 500,t–RS&P 500)2 | (RDELL,t–RDELL)×(RS&P 500,t–RS&P 500) |
|---|---|---|---|---|---|---|
| 1. | Jan 31, 2019 | -0.57% | 7.87% | 9.47 | 44.14 | -20.44 |
| 2. | Feb 28, 2019 | 14.88% | 2.97% | 153.16 | 3.06 | 21.64 |
| 3. | Mar 31, 2019 | 5.14% | 1.79% | 6.96 | 0.32 | 1.50 |
| . | . | . | . | . | . | . |
| . | . | . | . | . | . | . |
| . | . | . | . | . | . | . |
| 60. | Dec 31, 2023 | 0.83% | 4.42% | 2.80 | 10.23 | -5.35 |
| 61. | Jan 31, 2024 | 8.82% | 1.59% | 39.94 | 0.13 | 2.31 |
| Total (Σ): | 5,084.11 | 1,679.41 | 1,416.75 | |||
| t | Date | RDELL,t | RS&P 500,t | (RDELL,t–RDELL)2 | (RS&P 500,t–RS&P 500)2 | (RDELL,t–RDELL)×(RS&P 500,t–RS&P 500) |
|---|---|---|---|---|---|---|
| 1. | Jan 31, 2019 | -0.57% | 7.87% | 9.47 | 44.14 | -20.44 |
| 2. | Feb 28, 2019 | 14.88% | 2.97% | 153.16 | 3.06 | 21.64 |
| 3. | Mar 31, 2019 | 5.14% | 1.79% | 6.96 | 0.32 | 1.50 |
| 4. | Apr 30, 2019 | 14.86% | 3.93% | 152.62 | 7.33 | 33.44 |
| 5. | May 31, 2019 | -11.66% | -6.58% | 200.62 | 60.88 | 110.51 |
| 6. | Jun 30, 2019 | -14.69% | 6.89% | 295.75 | 32.13 | -97.48 |
| 7. | Jul 31, 2019 | 13.66% | 1.31% | 124.49 | 0.01 | 0.98 |
| 8. | Aug 31, 2019 | -10.76% | -1.81% | 175.80 | 9.20 | 40.23 |
| 9. | Sep 30, 2019 | 0.64% | 1.72% | 3.47 | 0.24 | -0.92 |
| 10. | Oct 31, 2019 | 1.99% | 2.04% | 0.27 | 0.67 | -0.42 |
| 11. | Nov 30, 2019 | -8.32% | 3.40% | 117.14 | 4.75 | -23.60 |
| 12. | Dec 31, 2019 | 5.98% | 2.86% | 12.09 | 2.67 | 5.68 |
| 13. | Jan 31, 2020 | -5.10% | -0.16% | 57.79 | 1.93 | 10.55 |
| 14. | Feb 29, 2020 | -17.04% | -8.41% | 381.93 | 92.85 | 188.31 |
| 15. | Mar 31, 2020 | -2.25% | -12.51% | 22.59 | 188.69 | 65.29 |
| 16. | Apr 30, 2020 | 7.94% | 12.68% | 29.54 | 131.33 | 62.29 |
| 17. | May 31, 2020 | 16.28% | 4.53% | 189.78 | 10.91 | 45.51 |
| 18. | Jun 30, 2020 | 10.68% | 1.84% | 66.80 | 0.38 | 5.02 |
| 19. | Jul 31, 2020 | 8.90% | 5.51% | 40.92 | 18.37 | 27.41 |
| 20. | Aug 31, 2020 | 10.45% | 7.01% | 63.08 | 33.43 | 45.92 |
| 21. | Sep 30, 2020 | 2.44% | -3.92% | 0.00 | 26.50 | 0.35 |
| 22. | Oct 31, 2020 | -10.98% | -2.77% | 181.72 | 15.93 | 53.80 |
| 23. | Nov 30, 2020 | 14.55% | 10.75% | 145.19 | 90.82 | 114.83 |
| 24. | Dec 31, 2020 | 6.17% | 3.71% | 13.45 | 6.19 | 9.12 |
| 25. | Jan 31, 2021 | -0.55% | -1.11% | 9.30 | 5.47 | 7.13 |
| 26. | Feb 28, 2021 | 11.22% | 2.61% | 76.01 | 1.92 | 12.07 |
| 27. | Mar 31, 2021 | 8.73% | 4.24% | 38.80 | 9.12 | 18.81 |
| 28. | Apr 30, 2021 | 11.55% | 5.24% | 81.80 | 16.14 | 36.34 |
| 29. | May 31, 2021 | 0.32% | 0.55% | 4.79 | 0.46 | 1.48 |
| 30. | Jun 30, 2021 | 1.04% | 2.22% | 2.13 | 0.99 | -1.45 |
| 31. | Jul 31, 2021 | -3.06% | 2.27% | 30.96 | 1.10 | -5.84 |
| 32. | Aug 31, 2021 | 0.87% | 2.90% | 2.67 | 2.80 | -2.74 |
| 33. | Sep 30, 2021 | 6.75% | -4.76% | 18.04 | 35.78 | -25.41 |
| 34. | Oct 31, 2021 | 5.72% | 6.91% | 10.34 | 32.37 | 18.29 |
| 35. | Nov 30, 2021 | 1.21% | -0.83% | 1.68 | 4.24 | 2.66 |
| 36. | Dec 31, 2021 | -0.53% | 4.36% | 9.21 | 9.84 | -9.52 |
| 37. | Jan 31, 2022 | 1.14% | -5.26% | 1.86 | 42.03 | 8.85 |
| 38. | Feb 28, 2022 | -10.30% | -3.14% | 163.88 | 19.02 | 55.82 |
| 39. | Mar 31, 2022 | -1.51% | 3.58% | 16.12 | 5.54 | -9.45 |
| 40. | Apr 30, 2022 | -5.68% | -8.80% | 66.95 | 100.41 | 81.99 |
| 41. | May 31, 2022 | 6.23% | 0.01% | 13.90 | 1.49 | -4.55 |
| 42. | Jun 30, 2022 | -7.47% | -8.39% | 99.46 | 92.48 | 95.91 |
| 43. | Jul 31, 2022 | -1.77% | 9.11% | 18.30 | 62.20 | -33.74 |
| 44. | Aug 31, 2022 | -15.02% | -4.24% | 307.24 | 29.91 | 95.86 |
| 45. | Sep 30, 2022 | -10.76% | -9.34% | 175.93 | 111.60 | 140.12 |
| 46. | Oct 31, 2022 | 13.35% | 7.99% | 117.53 | 45.72 | 73.30 |
| 47. | Nov 30, 2022 | 16.64% | 5.38% | 199.85 | 17.23 | 58.68 |
| 48. | Dec 31, 2022 | -10.20% | -5.90% | 161.47 | 50.72 | 90.50 |
| 49. | Jan 31, 2023 | 1.82% | 6.18% | 0.47 | 24.51 | -3.41 |
| 50. | Feb 28, 2023 | 0.05% | -2.61% | 6.03 | 14.71 | 9.42 |
| 51. | Mar 31, 2023 | -1.06% | 3.51% | 12.69 | 5.20 | -8.12 |
| 52. | Apr 30, 2023 | 9.08% | 1.46% | 43.21 | 0.06 | 1.57 |
| 53. | May 31, 2023 | 3.04% | 0.25% | 0.28 | 0.95 | -0.52 |
| 54. | Jun 30, 2023 | 20.75% | 4.71% | 333.08 | 12.17 | 63.68 |
| 55. | Jul 31, 2023 | -1.52% | 4.85% | 16.16 | 13.11 | -14.56 |
| 56. | Aug 31, 2023 | 6.27% | -1.77% | 14.21 | 8.98 | -11.30 |
| 57. | Sep 30, 2023 | 22.51% | -4.87% | 400.27 | 37.17 | -121.97 |
| 58. | Oct 31, 2023 | -2.35% | -2.20% | 23.57 | 11.71 | 16.62 |
| 59. | Nov 30, 2023 | 13.39% | 8.92% | 118.53 | 59.19 | 83.76 |
| 60. | Dec 31, 2023 | 0.83% | 4.42% | 2.80 | 10.23 | -5.35 |
| 61. | Jan 31, 2024 | 8.82% | 1.59% | 39.94 | 0.13 | 2.31 |
| Total (Σ): | 5,084.11 | 1,679.41 | 1,416.75 | |||
Show all
VarianceDELL = Σ(RDELL,t–RDELL)2 ÷ (61 – 1)
= 5,084.11 ÷ (61 – 1)
= 84.74
VarianceS&P 500 = Σ(RS&P 500,t–RS&P 500)2 ÷ (61 – 1)
= 1,679.41 ÷ (61 – 1)
= 27.99
CovarianceDELL, S&P 500 = Σ(RDELL,t–RDELL)×(RS&P 500,t–RS&P 500) ÷ (61 – 1)
= 1,416.75 ÷ (61 – 1)
= 23.61
Systematic Risk (β) Estimation
| VarianceDELL | 84.74 |
| VarianceS&P 500 | 27.99 |
| CovarianceDELL, S&P 500 | 23.61 |
| Correlation coefficientDELL, S&P 5001 | 0.48 |
| βDELL2 | 0.84 |
| αDELL3 | 1.47% |
Calculations
1 Correlation coefficientDELL, S&P 500
= CovarianceDELL, S&P 500 ÷ (Standard deviationDELL × Standard deviationS&P 500)
= 23.61 ÷ (9.21% × 5.29%)
= 0.48
2 βDELL
= CovarianceDELL, S&P 500 ÷ VarianceS&P 500
= 23.61 ÷ 27.99
= 0.84
3 αDELL
= AverageDELL – βDELL × AverageS&P 500
= 2.50% – 0.84 × 1.22%
= 1.47%
Expected Rate of Return
| Assumptions | ||
| Rate of return on LT Treasury Composite1 | RF | 4.81% |
| Expected rate of return on market portfolio2 | E(RM) | 14.45% |
| Systematic risk (β) of Dell Technologies Inc. common stock | βDELL | 0.84 |
| Expected rate of return on Dell Technologies Inc. common stock3 | E(RDELL) | 12.94% |
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(RDELL) = RF + βDELL [E(RM) – RF]
= 4.81% + 0.84 [14.45% – 4.81%]
= 12.94%