Stock Analysis on Net
Stock Analysis on Net
Microsoft Excel LibreOffice Calc

Alphabet Inc. (NASDAQ:GOOG)

Capital Asset Pricing Model (CAPM)

Intermediate level


Rates of Return

Alphabet Inc., monthly rates of return

Microsoft Excel LibreOffice Calc
Alphabet Inc. (GOOG) Standard & Poor’s 500 (S&P 500)
t Date PriceGOOG,t1 DividendGOOG,t1 RGOOG,t2 PriceS&P 500,t RS&P 500,t3
Jan 31, 2015 534.52 1,994.99
1. Feb 28, 2015 558.40 4.47% 2,104.50 5.49%
2. Mar 31, 2015 548.00 -1.86% 2,067.89 -1.74%
3. Apr 30, 2015 537.34 -1.95% 2,085.51 0.85%
. . . . . . .
. . . . . . .
. . . . . . .
58. Nov 30, 2019 1,304.96 3.56% 3,140.98 3.40%
59. Dec 31, 2019 1,337.02 2.46% 3,230.78 2.86%
Average: 1.73% 0.88%
Standard deviation: 5.85% 3.45%
Alphabet Inc. (GOOG) Standard & Poor’s 500 (S&P 500)
t Date PriceGOOG,t1 DividendGOOG,t1 RGOOG,t2 PriceS&P 500,t RS&P 500,t3
Jan 31, 2015 534.52 1,994.99
1. Feb 28, 2015 558.40 4.47% 2,104.50 5.49%
2. Mar 31, 2015 548.00 -1.86% 2,067.89 -1.74%
3. Apr 30, 2015 537.34 -1.95% 2,085.51 0.85%
4. May 31, 2015 532.11 -0.97% 2,107.39 1.05%
5. Jun 30, 2015 520.51 -2.18% 2,063.11 -2.10%
6. Jul 31, 2015 625.61 20.19% 2,103.84 1.97%
7. Aug 31, 2015 618.25 -1.18% 1,972.18 -6.26%
8. Sep 30, 2015 608.42 -1.59% 1,920.03 -2.64%
9. Oct 31, 2015 710.81 16.83% 2,079.36 8.30%
10. Nov 30, 2015 742.60 4.47% 2,080.41 0.05%
11. Dec 31, 2015 758.88 2.19% 2,043.94 -1.75%
12. Jan 31, 2016 742.95 -2.10% 1,940.24 -5.07%
13. Feb 29, 2016 697.77 -6.08% 1,932.23 -0.41%
14. Mar 31, 2016 744.95 6.76% 2,059.74 6.60%
15. Apr 30, 2016 693.01 -6.97% 2,065.30 0.27%
16. May 31, 2016 735.72 6.16% 2,096.95 1.53%
17. Jun 30, 2016 692.10 -5.93% 2,098.86 0.09%
18. Jul 31, 2016 768.79 11.08% 2,173.60 3.56%
19. Aug 31, 2016 767.05 -0.23% 2,170.95 -0.12%
20. Sep 30, 2016 777.29 1.33% 2,168.27 -0.12%
21. Oct 31, 2016 784.54 0.93% 2,126.15 -1.94%
22. Nov 30, 2016 758.04 -3.38% 2,198.81 3.42%
23. Dec 31, 2016 771.82 1.82% 2,238.83 1.82%
24. Jan 31, 2017 796.79 3.24% 2,278.87 1.79%
25. Feb 28, 2017 823.21 3.32% 2,363.64 3.72%
26. Mar 31, 2017 829.56 0.77% 2,362.72 -0.04%
27. Apr 30, 2017 905.96 9.21% 2,384.20 0.91%
28. May 31, 2017 964.86 6.50% 2,411.80 1.16%
29. Jun 30, 2017 908.73 -5.82% 2,423.41 0.48%
30. Jul 31, 2017 930.50 2.40% 2,470.30 1.93%
31. Aug 31, 2017 939.33 0.95% 2,471.65 0.05%
32. Sep 30, 2017 959.11 2.11% 2,519.36 1.93%
33. Oct 31, 2017 1,016.64 6.00% 2,575.26 2.22%
34. Nov 30, 2017 1,021.41 0.47% 2,647.58 2.81%
35. Dec 31, 2017 1,046.40 2.45% 2,673.61 0.98%
36. Jan 31, 2018 1,169.94 11.81% 2,823.81 5.62%
37. Feb 28, 2018 1,104.73 -5.57% 2,713.83 -3.89%
38. Mar 31, 2018 1,031.79 -6.60% 2,640.87 -2.69%
39. Apr 30, 2018 1,017.33 -1.40% 2,648.05 0.27%
40. May 31, 2018 1,084.99 6.65% 2,705.27 2.16%
41. Jun 30, 2018 1,115.65 2.83% 2,718.37 0.48%
42. Jul 31, 2018 1,217.26 9.11% 2,816.29 3.60%
43. Aug 31, 2018 1,218.19 0.08% 2,901.52 3.03%
44. Sep 30, 2018 1,193.47 -2.03% 2,913.98 0.43%
45. Oct 31, 2018 1,076.77 -9.78% 2,711.74 -6.94%
46. Nov 30, 2018 1,094.43 1.64% 2,760.17 1.79%
47. Dec 31, 2018 1,035.61 -5.37% 2,506.85 -9.18%
48. Jan 31, 2019 1,116.37 7.80% 2,704.10 7.87%
49. Feb 28, 2019 1,119.92 0.32% 2,784.49 2.97%
50. Mar 31, 2019 1,173.31 4.77% 2,834.40 1.79%
51. Apr 30, 2019 1,188.48 1.29% 2,945.83 3.93%
52. May 31, 2019 1,103.63 -7.14% 2,752.06 -6.58%
53. Jun 30, 2019 1,080.91 -2.06% 2,941.76 6.89%
54. Jul 31, 2019 1,216.68 12.56% 2,980.38 1.31%
55. Aug 31, 2019 1,188.10 -2.35% 2,926.46 -1.81%
56. Sep 30, 2019 1,219.00 2.60% 2,976.74 1.72%
57. Oct 31, 2019 1,260.11 3.37% 3,037.56 2.04%
58. Nov 30, 2019 1,304.96 3.56% 3,140.98 3.40%
59. Dec 31, 2019 1,337.02 2.46% 3,230.78 2.86%
Average: 1.73% 0.88%
Standard deviation: 5.85% 3.45%

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 GOOG during period t

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


Systematic Risk (β) Estimation

Microsoft Excel LibreOffice Calc
VarianceGOOG 34.22
VarianceS&P 500 11.88
CovarianceGOOG, S&P 500 12.27
Correlation coefficientGOOG, S&P 5001 0.61
βGOOG2 1.03
αGOOG3 0.82

Calculations

1 Correlation coefficientGOOG, S&P 500
= CovarianceGOOG, S&P 500 ÷ (Standard deviationGOOG × Standard deviationS&P 500)
= 12.27 ÷ (5.85 × 3.45)

2 βGOOG
= CovarianceGOOG, S&P 500 ÷ VarianceS&P 500
= 12.27 ÷ 11.88

3 αGOOG
= AverageGOOG – βGOOG × AverageS&P 500
= 1.731.03 × 0.88


Expected Rate of Return

Microsoft Excel LibreOffice Calc
Assumptions
Rate of return on LT Treasury Composite1 RF 1.18%
Expected rate of return on market portfolio2 E(RM) 11.87%
Systematic risk (β) of Alphabet Inc.’s common stock βGOOG 1.03
 
Expected rate of return on Alphabet Inc.’s common stock3 E(RGOOG) 12.23%

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(RGOOG) = RF + βGOOG [E(RM) – RF]
= 1.18% + 1.03 [11.87%1.18%]
= 12.23%