Stock Analysis on Net
Stock Analysis on Net

Target Corp. (NYSE:TGT)

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Capital Asset Pricing Model (CAPM)

Microsoft Excel

Capital asset pricing model (CAPM) indicates what should be the expected or required rate of return on risky assets like Target Corp. common stock.

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Rates of Return

Target Corp., monthly rates of return

Microsoft Excel
Target Corp. (TGT) Standard & Poor’s 500 (S&P 500)
t Date PriceTGT,t1 DividendTGT,t1 RTGT,t2 PriceS&P 500,t RS&P 500,t3
Feb 28, 2018
1. Mar 31, 2018
2. Apr 30, 2018
3. May 31, 2018
. . . . . . .
. . . . . . .
. . . . . . .
70. Dec 31, 2023
71. Jan 31, 2024
Average (R):
Standard deviation:
Target Corp. (TGT) Standard & Poor’s 500 (S&P 500)
t Date PriceTGT,t1 DividendTGT,t1 RTGT,t2 PriceS&P 500,t RS&P 500,t3
Feb 28, 2018
1. Mar 31, 2018
2. Apr 30, 2018
3. May 31, 2018
4. Jun 30, 2018
5. Jul 31, 2018
6. Aug 31, 2018
7. Sep 30, 2018
8. Oct 31, 2018
9. Nov 30, 2018
10. Dec 31, 2018
11. Jan 31, 2019
12. Feb 28, 2019
13. Mar 31, 2019
14. Apr 30, 2019
15. May 31, 2019
16. Jun 30, 2019
17. Jul 31, 2019
18. Aug 31, 2019
19. Sep 30, 2019
20. Oct 31, 2019
21. Nov 30, 2019
22. Dec 31, 2019
23. Jan 31, 2020
24. Feb 29, 2020
25. Mar 31, 2020
26. Apr 30, 2020
27. May 31, 2020
28. Jun 30, 2020
29. Jul 31, 2020
30. Aug 31, 2020
31. Sep 30, 2020
32. Oct 31, 2020
33. Nov 30, 2020
34. Dec 31, 2020
35. Jan 31, 2021
36. Feb 28, 2021
37. Mar 31, 2021
38. Apr 30, 2021
39. May 31, 2021
40. Jun 30, 2021
41. Jul 31, 2021
42. Aug 31, 2021
43. Sep 30, 2021
44. Oct 31, 2021
45. Nov 30, 2021
46. Dec 31, 2021
47. Jan 31, 2022
48. Feb 28, 2022
49. Mar 31, 2022
50. Apr 30, 2022
51. May 31, 2022
52. Jun 30, 2022
53. Jul 31, 2022
54. Aug 31, 2022
55. Sep 30, 2022
56. Oct 31, 2022
57. Nov 30, 2022
58. Dec 31, 2022
59. Jan 31, 2023
60. Feb 28, 2023
61. Mar 31, 2023
62. Apr 30, 2023
63. May 31, 2023
64. Jun 30, 2023
65. Jul 31, 2023
66. Aug 31, 2023
67. Sep 30, 2023
68. Oct 31, 2023
69. Nov 30, 2023
70. Dec 31, 2023
71. Jan 31, 2024
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 TGT during period t

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

Variance and Covariance

Target Corp., calculation of variance and covariance of returns

Microsoft Excel
t Date RTGT,t RS&P 500,t (RTGT,t–RTGT)2 (RS&P 500,t–RS&P 500)2 (RTGT,t–RTGT)×(RS&P 500,t–RS&P 500)
1. Mar 31, 2018
2. Apr 30, 2018
3. May 31, 2018
. . . . . . .
. . . . . . .
. . . . . . .
70. Dec 31, 2023
71. Jan 31, 2024
Total (Σ):
t Date RTGT,t RS&P 500,t (RTGT,t–RTGT)2 (RS&P 500,t–RS&P 500)2 (RTGT,t–RTGT)×(RS&P 500,t–RS&P 500)
1. Mar 31, 2018
2. Apr 30, 2018
3. May 31, 2018
4. Jun 30, 2018
5. Jul 31, 2018
6. Aug 31, 2018
7. Sep 30, 2018
8. Oct 31, 2018
9. Nov 30, 2018
10. Dec 31, 2018
11. Jan 31, 2019
12. Feb 28, 2019
13. Mar 31, 2019
14. Apr 30, 2019
15. May 31, 2019
16. Jun 30, 2019
17. Jul 31, 2019
18. Aug 31, 2019
19. Sep 30, 2019
20. Oct 31, 2019
21. Nov 30, 2019
22. Dec 31, 2019
23. Jan 31, 2020
24. Feb 29, 2020
25. Mar 31, 2020
26. Apr 30, 2020
27. May 31, 2020
28. Jun 30, 2020
29. Jul 31, 2020
30. Aug 31, 2020
31. Sep 30, 2020
32. Oct 31, 2020
33. Nov 30, 2020
34. Dec 31, 2020
35. Jan 31, 2021
36. Feb 28, 2021
37. Mar 31, 2021
38. Apr 30, 2021
39. May 31, 2021
40. Jun 30, 2021
41. Jul 31, 2021
42. Aug 31, 2021
43. Sep 30, 2021
44. Oct 31, 2021
45. Nov 30, 2021
46. Dec 31, 2021
47. Jan 31, 2022
48. Feb 28, 2022
49. Mar 31, 2022
50. Apr 30, 2022
51. May 31, 2022
52. Jun 30, 2022
53. Jul 31, 2022
54. Aug 31, 2022
55. Sep 30, 2022
56. Oct 31, 2022
57. Nov 30, 2022
58. Dec 31, 2022
59. Jan 31, 2023
60. Feb 28, 2023
61. Mar 31, 2023
62. Apr 30, 2023
63. May 31, 2023
64. Jun 30, 2023
65. Jul 31, 2023
66. Aug 31, 2023
67. Sep 30, 2023
68. Oct 31, 2023
69. Nov 30, 2023
70. Dec 31, 2023
71. Jan 31, 2024
Total (Σ):

Show all

VarianceTGT = Σ(RTGT,t–RTGT)2 ÷ (71 – 1)
= ÷ (71 – 1)
=

VarianceS&P 500 = Σ(RS&P 500,t–RS&P 500)2 ÷ (71 – 1)
= ÷ (71 – 1)
=

CovarianceTGT, S&P 500 = Σ(RTGT,t–RTGT)×(RS&P 500,t–RS&P 500) ÷ (71 – 1)
= ÷ (71 – 1)
=

Systematic Risk (β) Estimation

Microsoft Excel
VarianceTGT
VarianceS&P 500
CovarianceTGT, S&P 500
Correlation coefficientTGT, S&P 5001
βTGT2
αTGT3

Calculations

1 Correlation coefficientTGT, S&P 500
= CovarianceTGT, S&P 500 ÷ (Standard deviationTGT × Standard deviationS&P 500)
= ÷ ( × )
=

2 βTGT
= CovarianceTGT, S&P 500 ÷ VarianceS&P 500
= ÷
=

3 αTGT
= AverageTGT – βTGT × AverageS&P 500
= – ×
=

Expected Rate of Return

Microsoft Excel
Assumptions
Rate of return on LT Treasury Composite1 RF
Expected rate of return on market portfolio2 E(RM)
Systematic risk (β) of Target Corp. common stock βTGT
 
Expected rate of return on Target Corp. common stock3 E(RTGT)

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(RTGT) = RF + βTGT [E(RM) – RF]
= + [ – ]
=