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 HP Inc. common stock.
Paying user area
Try for free
HP Inc. pages available for free this week:
- Statement of Comprehensive Income
- Common-Size Income Statement
- Analysis of Solvency Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Analysis of Reportable Segments
- Operating Profit Margin since 2005
- Return on Equity (ROE) since 2005
- Total Asset Turnover since 2005
- Price to Earnings (P/E) since 2005
- Analysis of Debt
The data is hidden behind: . Unhide it.
Get full access to the entire website from $10.42/mo, or
get 1-month access to HP Inc. for $22.49.
This is a one-time payment. There is no automatic renewal.
We accept:
Rates of Return
HP Inc., monthly rates of return
| HP Inc. (HPQ) | Standard & Poor’s 500 (S&P 500) | |||||
|---|---|---|---|---|---|---|
| t | Date | PriceHPQ,t1 | DividendHPQ,t1 | RHPQ,t2 | PriceS&P 500,t | RS&P 500,t3 |
| Nov 30, 2012 | ||||||
| 1. | Dec 31, 2012 | |||||
| 2. | Jan 31, 2013 | |||||
| 3. | Feb 28, 2013 | |||||
| . | . | . | . | . | . | . |
| . | . | . | . | . | . | . |
| . | . | . | . | . | . | . |
| 70. | Sep 30, 2018 | |||||
| 71. | Oct 31, 2018 | |||||
| Average (R): | ||||||
| Standard deviation: | ||||||
| HP Inc. (HPQ) | Standard & Poor’s 500 (S&P 500) | |||||
|---|---|---|---|---|---|---|
| t | Date | PriceHPQ,t1 | DividendHPQ,t1 | RHPQ,t2 | PriceS&P 500,t | RS&P 500,t3 |
| Nov 30, 2012 | ||||||
| 1. | Dec 31, 2012 | |||||
| 2. | Jan 31, 2013 | |||||
| 3. | Feb 28, 2013 | |||||
| 4. | Mar 31, 2013 | |||||
| 5. | Apr 30, 2013 | |||||
| 6. | May 31, 2013 | |||||
| 7. | Jun 30, 2013 | |||||
| 8. | Jul 31, 2013 | |||||
| 9. | Aug 31, 2013 | |||||
| 10. | Sep 30, 2013 | |||||
| 11. | Oct 31, 2013 | |||||
| 12. | Nov 30, 2013 | |||||
| 13. | Dec 31, 2013 | |||||
| 14. | Jan 31, 2014 | |||||
| 15. | Feb 28, 2014 | |||||
| 16. | Mar 31, 2014 | |||||
| 17. | Apr 30, 2014 | |||||
| 18. | May 31, 2014 | |||||
| 19. | Jun 30, 2014 | |||||
| 20. | Jul 31, 2014 | |||||
| 21. | Aug 31, 2014 | |||||
| 22. | Sep 30, 2014 | |||||
| 23. | Oct 31, 2014 | |||||
| 24. | Nov 30, 2014 | |||||
| 25. | Dec 31, 2014 | |||||
| 26. | Jan 31, 2015 | |||||
| 27. | Feb 28, 2015 | |||||
| 28. | Mar 31, 2015 | |||||
| 29. | Apr 30, 2015 | |||||
| 30. | May 31, 2015 | |||||
| 31. | Jun 30, 2015 | |||||
| 32. | Jul 31, 2015 | |||||
| 33. | Aug 31, 2015 | |||||
| 34. | Sep 30, 2015 | |||||
| 35. | Oct 31, 2015 | |||||
| 36. | Nov 30, 2015 | |||||
| 37. | Dec 31, 2015 | |||||
| 38. | Jan 31, 2016 | |||||
| 39. | Feb 29, 2016 | |||||
| 40. | Mar 31, 2016 | |||||
| 41. | Apr 30, 2016 | |||||
| 42. | May 31, 2016 | |||||
| 43. | Jun 30, 2016 | |||||
| 44. | Jul 31, 2016 | |||||
| 45. | Aug 31, 2016 | |||||
| 46. | Sep 30, 2016 | |||||
| 47. | Oct 31, 2016 | |||||
| 48. | Nov 30, 2016 | |||||
| 49. | Dec 31, 2016 | |||||
| 50. | Jan 31, 2017 | |||||
| 51. | Feb 28, 2017 | |||||
| 52. | Mar 31, 2017 | |||||
| 53. | Apr 30, 2017 | |||||
| 54. | May 31, 2017 | |||||
| 55. | Jun 30, 2017 | |||||
| 56. | Jul 31, 2017 | |||||
| 57. | Aug 31, 2017 | |||||
| 58. | Sep 30, 2017 | |||||
| 59. | Oct 31, 2017 | |||||
| 60. | Nov 30, 2017 | |||||
| 61. | Dec 31, 2017 | |||||
| 62. | Jan 31, 2018 | |||||
| 63. | Feb 28, 2018 | |||||
| 64. | Mar 31, 2018 | |||||
| 65. | Apr 30, 2018 | |||||
| 66. | May 31, 2018 | |||||
| 67. | Jun 30, 2018 | |||||
| 68. | Jul 31, 2018 | |||||
| 69. | Aug 31, 2018 | |||||
| 70. | Sep 30, 2018 | |||||
| 71. | Oct 31, 2018 | |||||
| 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 HPQ during period t
3 Rate of return on S&P 500 (the market portfolio proxy) during period t
Variance and Covariance
HP Inc., calculation of variance and covariance of returns
| t | Date | RHPQ,t | RS&P 500,t | (RHPQ,t–RHPQ)2 | (RS&P 500,t–RS&P 500)2 | (RHPQ,t–RHPQ)×(RS&P 500,t–RS&P 500) |
|---|---|---|---|---|---|---|
| 1. | Dec 31, 2012 | |||||
| 2. | Jan 31, 2013 | |||||
| 3. | Feb 28, 2013 | |||||
| . | . | . | . | . | . | . |
| . | . | . | . | . | . | . |
| . | . | . | . | . | . | . |
| 70. | Sep 30, 2018 | |||||
| 71. | Oct 31, 2018 | |||||
| Total (Σ): | ||||||
| t | Date | RHPQ,t | RS&P 500,t | (RHPQ,t–RHPQ)2 | (RS&P 500,t–RS&P 500)2 | (RHPQ,t–RHPQ)×(RS&P 500,t–RS&P 500) |
|---|---|---|---|---|---|---|
| 1. | Dec 31, 2012 | |||||
| 2. | Jan 31, 2013 | |||||
| 3. | Feb 28, 2013 | |||||
| 4. | Mar 31, 2013 | |||||
| 5. | Apr 30, 2013 | |||||
| 6. | May 31, 2013 | |||||
| 7. | Jun 30, 2013 | |||||
| 8. | Jul 31, 2013 | |||||
| 9. | Aug 31, 2013 | |||||
| 10. | Sep 30, 2013 | |||||
| 11. | Oct 31, 2013 | |||||
| 12. | Nov 30, 2013 | |||||
| 13. | Dec 31, 2013 | |||||
| 14. | Jan 31, 2014 | |||||
| 15. | Feb 28, 2014 | |||||
| 16. | Mar 31, 2014 | |||||
| 17. | Apr 30, 2014 | |||||
| 18. | May 31, 2014 | |||||
| 19. | Jun 30, 2014 | |||||
| 20. | Jul 31, 2014 | |||||
| 21. | Aug 31, 2014 | |||||
| 22. | Sep 30, 2014 | |||||
| 23. | Oct 31, 2014 | |||||
| 24. | Nov 30, 2014 | |||||
| 25. | Dec 31, 2014 | |||||
| 26. | Jan 31, 2015 | |||||
| 27. | Feb 28, 2015 | |||||
| 28. | Mar 31, 2015 | |||||
| 29. | Apr 30, 2015 | |||||
| 30. | May 31, 2015 | |||||
| 31. | Jun 30, 2015 | |||||
| 32. | Jul 31, 2015 | |||||
| 33. | Aug 31, 2015 | |||||
| 34. | Sep 30, 2015 | |||||
| 35. | Oct 31, 2015 | |||||
| 36. | Nov 30, 2015 | |||||
| 37. | Dec 31, 2015 | |||||
| 38. | Jan 31, 2016 | |||||
| 39. | Feb 29, 2016 | |||||
| 40. | Mar 31, 2016 | |||||
| 41. | Apr 30, 2016 | |||||
| 42. | May 31, 2016 | |||||
| 43. | Jun 30, 2016 | |||||
| 44. | Jul 31, 2016 | |||||
| 45. | Aug 31, 2016 | |||||
| 46. | Sep 30, 2016 | |||||
| 47. | Oct 31, 2016 | |||||
| 48. | Nov 30, 2016 | |||||
| 49. | Dec 31, 2016 | |||||
| 50. | Jan 31, 2017 | |||||
| 51. | Feb 28, 2017 | |||||
| 52. | Mar 31, 2017 | |||||
| 53. | Apr 30, 2017 | |||||
| 54. | May 31, 2017 | |||||
| 55. | Jun 30, 2017 | |||||
| 56. | Jul 31, 2017 | |||||
| 57. | Aug 31, 2017 | |||||
| 58. | Sep 30, 2017 | |||||
| 59. | Oct 31, 2017 | |||||
| 60. | Nov 30, 2017 | |||||
| 61. | Dec 31, 2017 | |||||
| 62. | Jan 31, 2018 | |||||
| 63. | Feb 28, 2018 | |||||
| 64. | Mar 31, 2018 | |||||
| 65. | Apr 30, 2018 | |||||
| 66. | May 31, 2018 | |||||
| 67. | Jun 30, 2018 | |||||
| 68. | Jul 31, 2018 | |||||
| 69. | Aug 31, 2018 | |||||
| 70. | Sep 30, 2018 | |||||
| 71. | Oct 31, 2018 | |||||
| Total (Σ): | ||||||
Show all
VarianceHPQ = Σ(RHPQ,t–RHPQ)2 ÷ (71 – 1)
= ÷ (71 – 1)
=
VarianceS&P 500 = Σ(RS&P 500,t–RS&P 500)2 ÷ (71 – 1)
= ÷ (71 – 1)
=
CovarianceHPQ, S&P 500 = Σ(RHPQ,t–RHPQ)×(RS&P 500,t–RS&P 500) ÷ (71 – 1)
= ÷ (71 – 1)
=
Systematic Risk (β) Estimation
| VarianceHPQ | |
| VarianceS&P 500 | |
| CovarianceHPQ, S&P 500 | |
| Correlation coefficientHPQ, S&P 5001 | |
| βHPQ2 | |
| αHPQ3 |
Calculations
1 Correlation coefficientHPQ, S&P 500
= CovarianceHPQ, S&P 500 ÷ (Standard deviationHPQ × Standard deviationS&P 500)
= ÷ ( × )
=
2 βHPQ
= CovarianceHPQ, S&P 500 ÷ VarianceS&P 500
= ÷
=
3 αHPQ
= AverageHPQ – βHPQ × AverageS&P 500
= – ×
=
Expected Rate of Return
| Assumptions | ||
| Rate of return on LT Treasury Composite1 | RF | |
| Expected rate of return on market portfolio2 | E(RM) | |
| Systematic risk (β) of HP Inc. common stock | βHPQ | |
| Expected rate of return on HP Inc. common stock3 | E(RHPQ) | |
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(RHPQ) = RF + βHPQ [E(RM) – RF]
= + [ – ]
=