Stock Analysis on Net
Stock Analysis on Net

Adobe Inc. (NASDAQ:ADBE)

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 Adobe Inc. common stock.

Rates of Return

Adobe Inc., monthly rates of return

Microsoft Excel
Adobe Inc. (ADBE) Standard & Poor’s 500 (S&P 500)
t Date PriceADBE,t1 DividendADBE,t1 RADBE,t2 PriceS&P 500,t RS&P 500,t3
Dec 31, 2017 $175.24 2,673.61
1. Jan 31, 2018 $199.76 13.99% 2,823.81 5.62%
2. Feb 28, 2018 $209.13 4.69% 2,713.83 -3.89%
3. Mar 31, 2018 $216.08 3.32% 2,640.87 -2.69%
. . . . . . .
. . . . . . .
. . . . . . .
70. Oct 31, 2023 $532.06 4.35% 4,193.80 -2.20%
71. Nov 30, 2023 $611.01 14.84% 4,567.80 8.92%
Average (R): 2.21% 0.89%
Standard deviation: 9.28% 5.22%
Adobe Inc. (ADBE) Standard & Poor’s 500 (S&P 500)
t Date PriceADBE,t1 DividendADBE,t1 RADBE,t2 PriceS&P 500,t RS&P 500,t3
Dec 31, 2017 $175.24 2,673.61
1. Jan 31, 2018 $199.76 13.99% 2,823.81 5.62%
2. Feb 28, 2018 $209.13 4.69% 2,713.83 -3.89%
3. Mar 31, 2018 $216.08 3.32% 2,640.87 -2.69%
4. Apr 30, 2018 $221.60 2.55% 2,648.05 0.27%
5. May 31, 2018 $249.28 12.49% 2,705.27 2.16%
6. Jun 30, 2018 $243.81 -2.19% 2,718.37 0.48%
7. Jul 31, 2018 $244.68 0.36% 2,816.29 3.60%
8. Aug 31, 2018 $263.51 7.70% 2,901.52 3.03%
9. Sep 30, 2018 $269.95 2.44% 2,913.98 0.43%
10. Oct 31, 2018 $245.76 -8.96% 2,711.74 -6.94%
11. Nov 30, 2018 $250.89 2.09% 2,760.17 1.79%
12. Dec 31, 2018 $226.24 -9.83% 2,506.85 -9.18%
13. Jan 31, 2019 $247.82 9.54% 2,704.10 7.87%
14. Feb 28, 2019 $262.50 5.92% 2,784.49 2.97%
15. Mar 31, 2019 $266.49 1.52% 2,834.40 1.79%
16. Apr 30, 2019 $289.25 8.54% 2,945.83 3.93%
17. May 31, 2019 $270.90 -6.34% 2,752.06 -6.58%
18. Jun 30, 2019 $294.65 8.77% 2,941.76 6.89%
19. Jul 31, 2019 $298.86 1.43% 2,980.38 1.31%
20. Aug 31, 2019 $284.51 -4.80% 2,926.46 -1.81%
21. Sep 30, 2019 $276.25 -2.90% 2,976.74 1.72%
22. Oct 31, 2019 $277.93 0.61% 3,037.56 2.04%
23. Nov 30, 2019 $309.53 11.37% 3,140.98 3.40%
24. Dec 31, 2019 $329.81 6.55% 3,230.78 2.86%
25. Jan 31, 2020 $351.14 6.47% 3,225.52 -0.16%
26. Feb 29, 2020 $345.12 -1.71% 2,954.22 -8.41%
27. Mar 31, 2020 $318.24 -7.79% 2,584.59 -12.51%
28. Apr 30, 2020 $353.64 11.12% 2,912.43 12.68%
29. May 31, 2020 $386.60 9.32% 3,044.31 4.53%
30. Jun 30, 2020 $435.31 12.60% 3,100.29 1.84%
31. Jul 31, 2020 $444.32 2.07% 3,271.12 5.51%
32. Aug 31, 2020 $513.39 15.55% 3,500.31 7.01%
33. Sep 30, 2020 $490.43 -4.47% 3,363.00 -3.92%
34. Oct 31, 2020 $447.10 -8.84% 3,269.96 -2.77%
35. Nov 30, 2020 $478.47 7.02% 3,621.63 10.75%
36. Dec 31, 2020 $500.12 4.52% 3,756.07 3.71%
37. Jan 31, 2021 $458.77 -8.27% 3,714.24 -1.11%
38. Feb 28, 2021 $459.67 0.20% 3,811.15 2.61%
39. Mar 31, 2021 $475.37 3.42% 3,972.89 4.24%
40. Apr 30, 2021 $508.34 6.94% 4,181.17 5.24%
41. May 31, 2021 $504.58 -0.74% 4,204.11 0.55%
42. Jun 30, 2021 $585.64 16.06% 4,297.50 2.22%
43. Jul 31, 2021 $621.63 6.15% 4,395.26 2.27%
44. Aug 31, 2021 $663.70 6.77% 4,522.68 2.90%
45. Sep 30, 2021 $575.72 -13.26% 4,307.54 -4.76%
46. Oct 31, 2021 $650.36 12.96% 4,605.38 6.91%
47. Nov 30, 2021 $669.85 3.00% 4,567.00 -0.83%
48. Dec 31, 2021 $567.06 -15.35% 4,766.18 4.36%
49. Jan 31, 2022 $534.30 -5.78% 4,515.55 -5.26%
50. Feb 28, 2022 $467.68 -12.47% 4,373.94 -3.14%
51. Mar 31, 2022 $455.62 -2.58% 4,530.41 3.58%
52. Apr 30, 2022 $395.95 -13.10% 4,131.93 -8.80%
53. May 31, 2022 $416.48 5.18% 4,132.15 0.01%
54. Jun 30, 2022 $366.06 -12.11% 3,785.38 -8.39%
55. Jul 31, 2022 $410.12 12.04% 4,130.29 9.11%
56. Aug 31, 2022 $373.44 -8.94% 3,955.00 -4.24%
57. Sep 30, 2022 $275.20 -26.31% 3,585.62 -9.34%
58. Oct 31, 2022 $318.50 15.73% 3,871.98 7.99%
59. Nov 30, 2022 $344.93 8.30% 4,080.11 5.38%
60. Dec 31, 2022 $336.53 -2.44% 3,839.50 -5.90%
61. Jan 31, 2023 $370.34 10.05% 4,076.60 6.18%
62. Feb 28, 2023 $323.95 -12.53% 3,970.15 -2.61%
63. Mar 31, 2023 $385.37 18.96% 4,109.31 3.51%
64. Apr 30, 2023 $377.56 -2.03% 4,169.48 1.46%
65. May 31, 2023 $417.79 10.66% 4,179.83 0.25%
66. Jun 30, 2023 $488.99 17.04% 4,376.86 4.71%
67. Jul 31, 2023 $546.17 11.69% 4,588.96 4.85%
68. Aug 31, 2023 $559.34 2.41% 4,507.66 -1.77%
69. Sep 30, 2023 $509.90 -8.84% 4,288.05 -4.87%
70. Oct 31, 2023 $532.06 4.35% 4,193.80 -2.20%
71. Nov 30, 2023 $611.01 14.84% 4,567.80 8.92%
Average (R): 2.21% 0.89%
Standard deviation: 9.28% 5.22%

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 ADBE during period t

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

Variance and Covariance

Adobe Inc., calculation of variance and covariance of returns

Microsoft Excel
t Date RADBE,t RS&P 500,t (RADBE,t–RADBE)2 (RS&P 500,t–RS&P 500)2 (RADBE,t–RADBE)×(RS&P 500,t–RS&P 500)
1. Jan 31, 2018 13.99% 5.62% 138.88 22.33 55.69
2. Feb 28, 2018 4.69% -3.89% 6.17 22.92 -11.89
3. Mar 31, 2018 3.32% -2.69% 1.25 12.82 -4.00
. . . . . . .
. . . . . . .
. . . . . . .
70. Oct 31, 2023 4.35% -2.20% 4.57 9.55 -6.61
71. Nov 30, 2023 14.84% 8.92% 159.54 64.41 101.37
Total (Σ): 6,033.20 1,909.09 2,514.29
t Date RADBE,t RS&P 500,t (RADBE,t–RADBE)2 (RS&P 500,t–RS&P 500)2 (RADBE,t–RADBE)×(RS&P 500,t–RS&P 500)
1. Jan 31, 2018 13.99% 5.62% 138.88 22.33 55.69
2. Feb 28, 2018 4.69% -3.89% 6.17 22.92 -11.89
3. Mar 31, 2018 3.32% -2.69% 1.25 12.82 -4.00
4. Apr 30, 2018 2.55% 0.27% 0.12 0.39 -0.22
5. May 31, 2018 12.49% 2.16% 105.75 1.61 13.04
6. Jun 30, 2018 -2.19% 0.48% 19.38 0.17 1.80
7. Jul 31, 2018 0.36% 3.60% 3.42 7.34 -5.01
8. Aug 31, 2018 7.70% 3.03% 30.12 4.55 11.71
9. Sep 30, 2018 2.44% 0.43% 0.06 0.21 -0.11
10. Oct 31, 2018 -8.96% -6.94% 124.73 61.35 87.48
11. Nov 30, 2018 2.09% 1.79% 0.01 0.80 -0.11
12. Dec 31, 2018 -9.83% -9.18% 144.78 101.41 121.17
13. Jan 31, 2019 9.54% 7.87% 53.74 48.66 51.14
14. Feb 28, 2019 5.92% 2.97% 13.81 4.33 7.73
15. Mar 31, 2019 1.52% 1.79% 0.47 0.81 -0.62
16. Apr 30, 2019 8.54% 3.93% 40.11 9.23 19.25
17. May 31, 2019 -6.34% -6.58% 73.13 55.81 63.88
18. Jun 30, 2019 8.77% 6.89% 43.03 36.01 39.36
19. Jul 31, 2019 1.43% 1.31% 0.61 0.18 -0.33
20. Aug 31, 2019 -4.80% -1.81% 49.13 7.30 18.94
21. Sep 30, 2019 -2.90% 1.72% 26.12 0.68 -4.22
22. Oct 31, 2019 0.61% 2.04% 2.56 1.32 -1.84
23. Nov 30, 2019 11.37% 3.40% 83.95 6.31 23.02
24. Dec 31, 2019 6.55% 2.86% 18.87 3.87 8.54
25. Jan 31, 2020 6.47% -0.16% 18.15 1.11 -4.50
26. Feb 29, 2020 -1.71% -8.41% 15.38 86.56 36.49
27. Mar 31, 2020 -7.79% -12.51% 99.92 179.68 133.99
28. Apr 30, 2020 11.12% 12.68% 79.50 139.05 105.14
29. May 31, 2020 9.32% 4.53% 50.59 13.22 25.86
30. Jun 30, 2020 12.60% 1.84% 108.00 0.90 9.83
31. Jul 31, 2020 2.07% 5.51% 0.02 21.32 -0.64
32. Aug 31, 2020 15.55% 7.01% 177.89 37.38 81.55
33. Sep 30, 2020 -4.47% -3.92% 44.62 23.19 32.16
34. Oct 31, 2020 -8.84% -2.77% 121.94 13.39 40.41
35. Nov 30, 2020 7.02% 10.75% 23.12 97.26 47.43
36. Dec 31, 2020 4.52% 3.71% 5.37 7.95 6.53
37. Jan 31, 2021 -8.27% -1.11% 109.74 4.02 21.02
38. Feb 28, 2021 0.20% 2.61% 4.05 2.95 -3.45
39. Mar 31, 2021 3.42% 4.24% 1.46 11.23 4.05
40. Apr 30, 2021 6.94% 5.24% 22.36 18.92 20.57
41. May 31, 2021 -0.74% 0.55% 8.69 0.12 1.01
42. Jun 30, 2021 16.06% 2.22% 192.03 1.77 18.41
43. Jul 31, 2021 6.15% 2.27% 15.51 1.91 5.44
44. Aug 31, 2021 6.77% 2.90% 20.80 4.03 9.15
45. Sep 30, 2021 -13.26% -4.76% 239.12 31.92 87.36
46. Oct 31, 2021 12.96% 6.91% 115.72 36.26 64.78
47. Nov 30, 2021 3.00% -0.83% 0.62 2.98 -1.36
48. Dec 31, 2021 -15.35% 4.36% 308.10 12.03 -60.89
49. Jan 31, 2022 -5.78% -5.26% 63.75 37.83 49.11
50. Feb 28, 2022 -12.47% -3.14% 215.39 16.23 59.12
51. Mar 31, 2022 -2.58% 3.58% 22.91 7.21 -12.85
52. Apr 30, 2022 -13.10% -8.80% 234.21 93.86 148.27
53. May 31, 2022 5.18% 0.01% 8.87 0.79 -2.64
54. Jun 30, 2022 -12.11% -8.39% 204.88 86.20 132.90
55. Jul 31, 2022 12.04% 9.11% 96.61 67.55 80.78
56. Aug 31, 2022 -8.94% -4.24% 124.35 26.38 57.28
57. Sep 30, 2022 -26.31% -9.34% 813.06 104.70 291.76
58. Oct 31, 2022 15.73% 7.99% 182.97 50.32 95.96
59. Nov 30, 2022 8.30% 5.38% 37.10 20.10 27.30
60. Dec 31, 2022 -2.44% -5.90% 21.56 46.10 31.52
61. Jan 31, 2023 10.05% 6.18% 61.45 27.91 41.41
62. Feb 28, 2023 -12.53% -2.61% 217.09 12.28 51.62
63. Mar 31, 2023 18.96% 3.51% 280.64 6.83 43.77
64. Apr 30, 2023 -2.03% 1.46% 17.93 0.33 -2.42
65. May 31, 2023 10.66% 0.25% 71.36 0.42 -5.44
66. Jun 30, 2023 17.04% 4.71% 220.06 14.60 56.69
67. Jul 31, 2023 11.69% 4.85% 89.98 15.63 37.50
68. Aug 31, 2023 2.41% -1.77% 0.04 7.10 -0.54
69. Sep 30, 2023 -8.84% -4.87% 122.02 33.23 63.68
70. Oct 31, 2023 4.35% -2.20% 4.57 9.55 -6.61
71. Nov 30, 2023 14.84% 8.92% 159.54 64.41 101.37
Total (Σ): 6,033.20 1,909.09 2,514.29

Show all

VarianceADBE = Σ(RADBE,t–RADBE)2 ÷ (71 – 1)
= 6,033.20 ÷ (71 – 1)
= 86.19

VarianceS&P 500 = Σ(RS&P 500,t–RS&P 500)2 ÷ (71 – 1)
= 1,909.09 ÷ (71 – 1)
= 27.27

CovarianceADBE, S&P 500 = Σ(RADBE,t–RADBE)×(RS&P 500,t–RS&P 500) ÷ (71 – 1)
= 2,514.29 ÷ (71 – 1)
= 35.92

Systematic Risk (β) Estimation

Microsoft Excel
VarianceADBE 86.19
VarianceS&P 500 27.27
CovarianceADBE, S&P 500 35.92
Correlation coefficientADBE, S&P 5001 0.74
βADBE2 1.32
αADBE3 1.03%

Calculations

1 Correlation coefficientADBE, S&P 500
= CovarianceADBE, S&P 500 ÷ (Standard deviationADBE × Standard deviationS&P 500)
= 35.92 ÷ (9.28% × 5.22%)
= 0.74

2 βADBE
= CovarianceADBE, S&P 500 ÷ VarianceS&P 500
= 35.92 ÷ 27.27
= 1.32

3 αADBE
= AverageADBE – βADBE × AverageS&P 500
= 2.21% – 1.32 × 0.89%
= 1.03%

Expected Rate of Return

Microsoft Excel
Assumptions
Rate of return on LT Treasury Composite1 RF 4.83%
Expected rate of return on market portfolio2 E(RM) 13.48%
Systematic risk (β) of Adobe Inc. common stock βADBE 1.32
 
Expected rate of return on Adobe Inc. common stock3 E(RADBE) 16.22%

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(RADBE) = RF + βADBE [E(RM) – RF]
= 4.83% + 1.32 [13.48% – 4.83%]
= 16.22%