Palantir Technologies Inc. (NYSE:PLTR)

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 Palantir Technologies Inc. common stock.

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

Rates of Return

Palantir Technologies Inc., monthly rates of return

		Palantir Technologies Inc. (PLTR)			Standard & Poor’s 500 (S&P 500)
t	Date	Price_PLTR,t¹	Dividend_PLTR,t¹	R_PLTR,t²	Price_{S&P 500,t}	R_{S&P 500,t}³
	Sep 30, 2020	$9.50			3,363.00
1.	Oct 31, 2020	$10.13		6.63%	3,269.96	-2.77%
2.	Nov 30, 2020	$27.11		167.62%	3,621.63	10.75%
3.	Dec 31, 2020	$23.55		-13.13%	3,756.07	3.71%
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38.	Nov 30, 2023	$20.05		35.47%	4,567.80	8.92%
39.	Dec 31, 2023	$17.17		-14.36%	4,769.83	4.42%
Average (R):				5.51%		1.03%
Standard deviation:				35.26%		5.15%

		Palantir Technologies Inc. (PLTR)			Standard & Poor’s 500 (S&P 500)
t	Date	Price_PLTR,t¹	Dividend_PLTR,t¹	R_PLTR,t²	Price_{S&P 500,t}	R_{S&P 500,t}³
	Sep 30, 2020	$9.50			3,363.00
1.	Oct 31, 2020	$10.13		6.63%	3,269.96	-2.77%
2.	Nov 30, 2020	$27.11		167.62%	3,621.63	10.75%
3.	Dec 31, 2020	$23.55		-13.13%	3,756.07	3.71%
4.	Jan 31, 2021	$35.18		49.38%	3,714.24	-1.11%
5.	Feb 28, 2021	$23.90		-32.06%	3,811.15	2.61%
6.	Mar 31, 2021	$23.29		-2.55%	3,972.89	4.24%
7.	Apr 30, 2021	$23.04		-1.07%	4,181.17	5.24%
8.	May 31, 2021	$22.95		-0.39%	4,204.11	0.55%
9.	Jun 30, 2021	$26.36		14.86%	4,297.50	2.22%
10.	Jul 31, 2021	$21.71		-17.64%	4,395.26	2.27%
11.	Aug 31, 2021	$26.34		21.33%	4,522.68	2.90%
12.	Sep 30, 2021	$24.04		-8.73%	4,307.54	-4.76%
13.	Oct 31, 2021	$25.88		7.65%	4,605.38	6.91%
14.	Nov 30, 2021	$20.65		-20.21%	4,567.00	-0.83%
15.	Dec 31, 2021	$18.21		-11.82%	4,766.18	4.36%
16.	Jan 31, 2022	$13.71		-24.71%	4,515.55	-5.26%
17.	Feb 28, 2022	$11.85		-13.57%	4,373.94	-3.14%
18.	Mar 31, 2022	$13.73		15.86%	4,530.41	3.58%
19.	Apr 30, 2022	$10.40		-24.25%	4,131.93	-8.80%
20.	May 31, 2022	$8.68		-16.54%	4,132.15	0.01%
21.	Jun 30, 2022	$9.07		4.49%	3,785.38	-8.39%
22.	Jul 31, 2022	$10.35		14.11%	4,130.29	9.11%
23.	Aug 31, 2022	$7.72		-25.41%	3,955.00	-4.24%
24.	Sep 30, 2022	$8.13		5.31%	3,585.62	-9.34%
25.	Oct 31, 2022	$8.79		8.12%	3,871.98	7.99%
26.	Nov 30, 2022	$7.50		-14.68%	4,080.11	5.38%
27.	Dec 31, 2022	$6.42		-14.40%	3,839.50	-5.90%
28.	Jan 31, 2023	$7.78		21.18%	4,076.60	6.18%
29.	Feb 28, 2023	$7.84		0.77%	3,970.15	-2.61%
30.	Mar 31, 2023	$8.45		7.78%	4,109.31	3.51%
31.	Apr 30, 2023	$7.75		-8.28%	4,169.48	1.46%
32.	May 31, 2023	$14.71		89.81%	4,179.83	0.25%
33.	Jun 30, 2023	$15.33		4.21%	4,376.86	4.71%
34.	Jul 31, 2023	$19.84		29.42%	4,588.96	4.85%
35.	Aug 31, 2023	$14.98		-24.50%	4,507.66	-1.77%
36.	Sep 30, 2023	$16.00		6.81%	4,288.05	-4.87%
37.	Oct 31, 2023	$14.80		-7.50%	4,193.80	-2.20%
38.	Nov 30, 2023	$20.05		35.47%	4,567.80	8.92%
39.	Dec 31, 2023	$17.17		-14.36%	4,769.83	4.42%
Average (R):				5.51%		1.03%
Standard deviation:				35.26%		5.15%

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¹ Data in US$ per share of common stock, adjusted for splits and stock dividends.

² Rate of return on common stock of PLTR during period t

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

Variance and Covariance

Palantir Technologies Inc., calculation of variance and covariance of returns

t	Date	R_PLTR,t	R_{S&P 500,t}	(R_PLTR,t–R_PLTR)²	(R_{S&P 500,t}–R_{S&P 500})²	(R_PLTR,t–R_PLTR)×(R_{S&P 500,t}–R_{S&P 500})
1.	Oct 31, 2020	6.63%	-2.77%	1.25	14.41	-4.24
2.	Nov 30, 2020	167.62%	10.75%	26,278.84	94.58	1,576.53
3.	Dec 31, 2020	-13.13%	3.71%	347.64	7.20	-50.02
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38.	Nov 30, 2023	35.47%	8.92%	897.57	62.23	236.34
39.	Dec 31, 2023	-14.36%	4.42%	395.12	11.52	-67.46
Total (Σ):				47,256.37	1,008.01	2,744.07

t	Date	R_PLTR,t	R_{S&P 500,t}	(R_PLTR,t–R_PLTR)²	(R_{S&P 500,t}–R_{S&P 500})²	(R_PLTR,t–R_PLTR)×(R_{S&P 500,t}–R_{S&P 500})
1.	Oct 31, 2020	6.63%	-2.77%	1.25	14.41	-4.24
2.	Nov 30, 2020	167.62%	10.75%	26,278.84	94.58	1,576.53
3.	Dec 31, 2020	-13.13%	3.71%	347.64	7.20	-50.02
4.	Jan 31, 2021	49.38%	-1.11%	1,924.65	4.59	-94.02
5.	Feb 28, 2021	-32.06%	2.61%	1,412.04	2.50	-59.36
6.	Mar 31, 2021	-2.55%	4.24%	65.06	10.33	-25.93
7.	Apr 30, 2021	-1.07%	5.24%	43.39	17.75	-27.75
8.	May 31, 2021	-0.39%	0.55%	34.86	0.23	2.84
9.	Jun 30, 2021	14.86%	2.22%	87.33	1.42	11.14
10.	Jul 31, 2021	-17.64%	2.27%	536.10	1.55	-28.84
11.	Aug 31, 2021	21.33%	2.90%	250.06	3.50	29.57
12.	Sep 30, 2021	-8.73%	-4.76%	202.93	33.48	82.43
13.	Oct 31, 2021	7.65%	6.91%	4.58	34.63	12.60
14.	Nov 30, 2021	-20.21%	-0.83%	661.63	3.47	47.91
15.	Dec 31, 2021	-11.82%	4.36%	300.31	11.10	-57.74
16.	Jan 31, 2022	-24.71%	-5.26%	913.56	39.54	190.05
17.	Feb 28, 2022	-13.57%	-3.14%	364.05	17.35	79.48
18.	Mar 31, 2022	15.86%	3.58%	107.15	6.49	26.38
19.	Apr 30, 2022	-24.25%	-8.80%	886.07	96.53	292.46
20.	May 31, 2022	-16.54%	0.01%	486.29	1.05	22.58
21.	Jun 30, 2022	4.49%	-8.39%	1.04	88.76	9.61
22.	Jul 31, 2022	14.11%	9.11%	73.94	65.32	69.50
23.	Aug 31, 2022	-25.41%	-4.24%	956.30	27.81	163.07
24.	Sep 30, 2022	5.31%	-9.34%	0.04	107.51	2.10
25.	Oct 31, 2022	8.12%	7.99%	6.78	48.40	18.12
26.	Nov 30, 2022	-14.68%	5.38%	407.60	18.89	-87.74
27.	Dec 31, 2022	-14.40%	-5.90%	396.54	47.98	137.93
28.	Jan 31, 2023	21.18%	6.18%	245.56	26.48	80.64
29.	Feb 28, 2023	0.77%	-2.61%	22.49	13.25	17.26
30.	Mar 31, 2023	7.78%	3.51%	5.14	6.13	5.61
31.	Apr 30, 2023	-8.28%	1.46%	190.37	0.19	-6.00
32.	May 31, 2023	89.81%	0.25%	7,105.31	0.61	-65.84
33.	Jun 30, 2023	4.21%	4.71%	1.69	13.58	-4.78
34.	Jul 31, 2023	29.42%	4.85%	571.50	14.57	91.24
35.	Aug 31, 2023	-24.50%	-1.77%	900.56	7.85	84.06
36.	Sep 30, 2023	6.81%	-4.87%	1.68	34.83	-7.65
37.	Oct 31, 2023	-7.50%	-2.20%	169.35	10.42	42.00
38.	Nov 30, 2023	35.47%	8.92%	897.57	62.23	236.34
39.	Dec 31, 2023	-14.36%	4.42%	395.12	11.52	-67.46
Total (Σ):				47,256.37	1,008.01	2,744.07

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Variance_PLTR = Σ(R_PLTR,t–R_PLTR)² ÷ (39 – 1)
= 47,256.37 ÷ (39 – 1)
= 1,243.59

Variance_{S&P 500} = Σ(R_{S&P 500,t}–R_{S&P 500})² ÷ (39 – 1)
= 1,008.01 ÷ (39 – 1)
= 26.53

Covariance_{PLTR, S&P 500} = Σ(R_PLTR,t–R_PLTR)×(R_{S&P 500,t}–R_{S&P 500}) ÷ (39 – 1)
= 2,744.07 ÷ (39 – 1)
= 72.21

Systematic Risk (β) Estimation

Variance_PLTR	1,243.59
Variance_{S&P 500}	26.53
Covariance_{PLTR, S&P 500}	72.21
Correlation coefficient_{PLTR, S&P 500}¹	0.40
β_PLTR²	2.72
α_PLTR³	2.71%

Calculations

¹ Correlation coefficient_{PLTR, S&P 500}
= Covariance_{PLTR, S&P 500} ÷ (Standard deviation_PLTR × Standard deviation_{S&P 500})
= 72.21 ÷ (35.26% × 5.15%)
= 0.40

² β_PLTR
= Covariance_{PLTR, S&P 500} ÷ Variance_{S&P 500}
= 72.21 ÷ 26.53
= 2.72

³ α_PLTR
= Average_PLTR – β_PLTR × Average_{S&P 500}
= 5.51% – 2.72 × 1.03%
= 2.71%

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)	13.77%
Systematic risk (β) of Palantir Technologies Inc. common stock	β_PLTR	2.72

Expected rate of return on Palantir Technologies Inc. common stock³	E(R_PLTR)	29.44%

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_PLTR) = R_F + β_PLTR [E(R_M) – R_F]
= 4.67% + 2.72 [13.77% – 4.67%]
= 29.44%