Capital asset pricing model (CAPM) indicates what should be the expected or required rate of return on risky assets like Lockheed Martin Corp. common stock.
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Lockheed Martin Corp. pages available for free this week:
- Income Statement
- Balance Sheet: Liabilities and Stockholders’ Equity
- Cash Flow Statement
- Analysis of Liquidity Ratios
- Analysis of Solvency Ratios
- Enterprise Value to EBITDA (EV/EBITDA)
- Operating Profit Margin since 2005
- Return on Assets (ROA) since 2005
- Price to Earnings (P/E) since 2005
- Aggregate Accruals
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Rates of Return
Lockheed Martin Corp. (LMT) | Standard & Poor’s 500 (S&P 500) | |||||
---|---|---|---|---|---|---|
t | Date | PriceLMT,t1 | DividendLMT,t1 | RLMT,t2 | PriceS&P 500,t | RS&P 500,t3 |
Jan 31, 2019 | ||||||
1. | Feb 28, 2019 | |||||
2. | Mar 31, 2019 | |||||
3. | Apr 30, 2019 | |||||
. | . | . | . | . | . | . |
. | . | . | . | . | . | . |
. | . | . | . | . | . | . |
58. | Nov 30, 2023 | |||||
59. | Dec 31, 2023 | |||||
Average (R): | ||||||
Standard deviation: |
Lockheed Martin Corp. (LMT) | Standard & Poor’s 500 (S&P 500) | |||||
---|---|---|---|---|---|---|
t | Date | PriceLMT,t1 | DividendLMT,t1 | RLMT,t2 | PriceS&P 500,t | RS&P 500,t3 |
Jan 31, 2019 | ||||||
1. | Feb 28, 2019 | |||||
2. | Mar 31, 2019 | |||||
3. | Apr 30, 2019 | |||||
4. | May 31, 2019 | |||||
5. | Jun 30, 2019 | |||||
6. | Jul 31, 2019 | |||||
7. | Aug 31, 2019 | |||||
8. | Sep 30, 2019 | |||||
9. | Oct 31, 2019 | |||||
10. | Nov 30, 2019 | |||||
11. | Dec 31, 2019 | |||||
12. | Jan 31, 2020 | |||||
13. | Feb 29, 2020 | |||||
14. | Mar 31, 2020 | |||||
15. | Apr 30, 2020 | |||||
16. | May 31, 2020 | |||||
17. | Jun 30, 2020 | |||||
18. | Jul 31, 2020 | |||||
19. | Aug 31, 2020 | |||||
20. | Sep 30, 2020 | |||||
21. | Oct 31, 2020 | |||||
22. | Nov 30, 2020 | |||||
23. | Dec 31, 2020 | |||||
24. | Jan 31, 2021 | |||||
25. | Feb 28, 2021 | |||||
26. | Mar 31, 2021 | |||||
27. | Apr 30, 2021 | |||||
28. | May 31, 2021 | |||||
29. | Jun 30, 2021 | |||||
30. | Jul 31, 2021 | |||||
31. | Aug 31, 2021 | |||||
32. | Sep 30, 2021 | |||||
33. | Oct 31, 2021 | |||||
34. | Nov 30, 2021 | |||||
35. | Dec 31, 2021 | |||||
36. | Jan 31, 2022 | |||||
37. | Feb 28, 2022 | |||||
38. | Mar 31, 2022 | |||||
39. | Apr 30, 2022 | |||||
40. | May 31, 2022 | |||||
41. | Jun 30, 2022 | |||||
42. | Jul 31, 2022 | |||||
43. | Aug 31, 2022 | |||||
44. | Sep 30, 2022 | |||||
45. | Oct 31, 2022 | |||||
46. | Nov 30, 2022 | |||||
47. | Dec 31, 2022 | |||||
48. | Jan 31, 2023 | |||||
49. | Feb 28, 2023 | |||||
50. | Mar 31, 2023 | |||||
51. | Apr 30, 2023 | |||||
52. | May 31, 2023 | |||||
53. | Jun 30, 2023 | |||||
54. | Jul 31, 2023 | |||||
55. | Aug 31, 2023 | |||||
56. | Sep 30, 2023 | |||||
57. | Oct 31, 2023 | |||||
58. | Nov 30, 2023 | |||||
59. | Dec 31, 2023 | |||||
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 LMT during period t
3 Rate of return on S&P 500 (the market portfolio proxy) during period t
Variance and Covariance
t | Date | RLMT,t | RS&P 500,t | (RLMT,t–RLMT)2 | (RS&P 500,t–RS&P 500)2 | (RLMT,t–RLMT)×(RS&P 500,t–RS&P 500) |
---|---|---|---|---|---|---|
1. | Feb 28, 2019 | |||||
2. | Mar 31, 2019 | |||||
3. | Apr 30, 2019 | |||||
. | . | . | . | . | . | . |
. | . | . | . | . | . | . |
. | . | . | . | . | . | . |
58. | Nov 30, 2023 | |||||
59. | Dec 31, 2023 | |||||
Total (Σ): |
t | Date | RLMT,t | RS&P 500,t | (RLMT,t–RLMT)2 | (RS&P 500,t–RS&P 500)2 | (RLMT,t–RLMT)×(RS&P 500,t–RS&P 500) |
---|---|---|---|---|---|---|
1. | Feb 28, 2019 | |||||
2. | Mar 31, 2019 | |||||
3. | Apr 30, 2019 | |||||
4. | May 31, 2019 | |||||
5. | Jun 30, 2019 | |||||
6. | Jul 31, 2019 | |||||
7. | Aug 31, 2019 | |||||
8. | Sep 30, 2019 | |||||
9. | Oct 31, 2019 | |||||
10. | Nov 30, 2019 | |||||
11. | Dec 31, 2019 | |||||
12. | Jan 31, 2020 | |||||
13. | Feb 29, 2020 | |||||
14. | Mar 31, 2020 | |||||
15. | Apr 30, 2020 | |||||
16. | May 31, 2020 | |||||
17. | Jun 30, 2020 | |||||
18. | Jul 31, 2020 | |||||
19. | Aug 31, 2020 | |||||
20. | Sep 30, 2020 | |||||
21. | Oct 31, 2020 | |||||
22. | Nov 30, 2020 | |||||
23. | Dec 31, 2020 | |||||
24. | Jan 31, 2021 | |||||
25. | Feb 28, 2021 | |||||
26. | Mar 31, 2021 | |||||
27. | Apr 30, 2021 | |||||
28. | May 31, 2021 | |||||
29. | Jun 30, 2021 | |||||
30. | Jul 31, 2021 | |||||
31. | Aug 31, 2021 | |||||
32. | Sep 30, 2021 | |||||
33. | Oct 31, 2021 | |||||
34. | Nov 30, 2021 | |||||
35. | Dec 31, 2021 | |||||
36. | Jan 31, 2022 | |||||
37. | Feb 28, 2022 | |||||
38. | Mar 31, 2022 | |||||
39. | Apr 30, 2022 | |||||
40. | May 31, 2022 | |||||
41. | Jun 30, 2022 | |||||
42. | Jul 31, 2022 | |||||
43. | Aug 31, 2022 | |||||
44. | Sep 30, 2022 | |||||
45. | Oct 31, 2022 | |||||
46. | Nov 30, 2022 | |||||
47. | Dec 31, 2022 | |||||
48. | Jan 31, 2023 | |||||
49. | Feb 28, 2023 | |||||
50. | Mar 31, 2023 | |||||
51. | Apr 30, 2023 | |||||
52. | May 31, 2023 | |||||
53. | Jun 30, 2023 | |||||
54. | Jul 31, 2023 | |||||
55. | Aug 31, 2023 | |||||
56. | Sep 30, 2023 | |||||
57. | Oct 31, 2023 | |||||
58. | Nov 30, 2023 | |||||
59. | Dec 31, 2023 | |||||
Total (Σ): |
Show all
VarianceLMT = Σ(RLMT,t–RLMT)2 ÷ (59 – 1)
= ÷ (59 – 1)
=
VarianceS&P 500 = Σ(RS&P 500,t–RS&P 500)2 ÷ (59 – 1)
= ÷ (59 – 1)
=
CovarianceLMT, S&P 500 = Σ(RLMT,t–RLMT)×(RS&P 500,t–RS&P 500) ÷ (59 – 1)
= ÷ (59 – 1)
=
Systematic Risk (β) Estimation
VarianceLMT | |
VarianceS&P 500 | |
CovarianceLMT, S&P 500 | |
Correlation coefficientLMT, S&P 5001 | |
βLMT2 | |
αLMT3 |
Calculations
1 Correlation coefficientLMT, S&P 500
= CovarianceLMT, S&P 500 ÷ (Standard deviationLMT × Standard deviationS&P 500)
= ÷ ( × )
=
2 βLMT
= CovarianceLMT, S&P 500 ÷ VarianceS&P 500
= ÷
=
3 αLMT
= AverageLMT – βLMT × 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 Lockheed Martin Corp. common stock | βLMT | |
Expected rate of return on Lockheed Martin Corp. common stock3 | E(RLMT) |
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(RLMT) = RF + βLMT [E(RM) – RF]
= + [ – ]
=