Stock Analysis on Net

Broadcom Inc. (NASDAQ:AVGO)

Capital Asset Pricing Model (CAPM)

Microsoft Excel

Rates of Return

Broadcom Inc., monthly rates of return

Microsoft Excel
Broadcom Inc. (AVGO) Standard & Poor’s 500 (S&P 500)
t Date PriceAVGO,t1 DividendAVGO,t1 RAVGO,t2 PriceS&P 500,t RS&P 500,t3
Nov 30, 2017 $277.94 2,647.58
1. Dec 31, 2017 $256.90 $1.75 -6.94% 2,673.61 0.98%
2. Jan 31, 2018 $248.03 -3.45% 2,823.81 5.62%
3. Feb 28, 2018 $246.46 -0.63% 2,713.83 -3.89%
. . . . . . .
. . . . . . .
. . . . . . .
70. Sep 30, 2023 $830.58 $4.60 -9.50% 4,288.05 -4.87%
71. Oct 31, 2023 $841.37 1.30% 4,193.80 -2.20%
Average (R): 2.22% 0.78%
Standard deviation: 8.67% 5.13%
Broadcom Inc. (AVGO) Standard & Poor’s 500 (S&P 500)
t Date PriceAVGO,t1 DividendAVGO,t1 RAVGO,t2 PriceS&P 500,t RS&P 500,t3
Nov 30, 2017 $277.94 2,647.58
1. Dec 31, 2017 $256.90 $1.75 -6.94% 2,673.61 0.98%
2. Jan 31, 2018 $248.03 -3.45% 2,823.81 5.62%
3. Feb 28, 2018 $246.46 -0.63% 2,713.83 -3.89%
4. Mar 31, 2018 $235.65 $1.75 -3.68% 2,640.87 -2.69%
5. Apr 30, 2018 $229.42 -2.64% 2,648.05 0.27%
6. May 31, 2018 $252.07 9.87% 2,705.27 2.16%
7. Jun 30, 2018 $242.64 $1.75 -3.05% 2,718.37 0.48%
8. Jul 31, 2018 $221.77 -8.60% 2,816.29 3.60%
9. Aug 31, 2018 $219.03 -1.24% 2,901.52 3.03%
10. Sep 30, 2018 $246.73 $1.75 13.45% 2,913.98 0.43%
11. Oct 31, 2018 $223.49 -9.42% 2,711.74 -6.94%
12. Nov 30, 2018 $237.41 6.23% 2,760.17 1.79%
13. Dec 31, 2018 $254.28 $2.65 8.22% 2,506.85 -9.18%
14. Jan 31, 2019 $268.25 5.49% 2,704.10 7.87%
15. Feb 28, 2019 $275.36 2.65% 2,784.49 2.97%
16. Mar 31, 2019 $300.71 $2.65 10.17% 2,834.40 1.79%
17. Apr 30, 2019 $318.40 5.88% 2,945.83 3.93%
18. May 31, 2019 $251.64 -20.97% 2,752.06 -6.58%
19. Jun 30, 2019 $287.86 $2.65 15.45% 2,941.76 6.89%
20. Jul 31, 2019 $289.99 0.74% 2,980.38 1.31%
21. Aug 31, 2019 $282.64 -2.53% 2,926.46 -1.81%
22. Sep 30, 2019 $276.07 $2.65 -1.39% 2,976.74 1.72%
23. Oct 31, 2019 $292.85 6.08% 3,037.56 2.04%
24. Nov 30, 2019 $316.21 7.98% 3,140.98 3.40%
25. Dec 31, 2019 $316.02 $3.25 0.97% 3,230.78 2.86%
26. Jan 31, 2020 $305.16 -3.44% 3,225.52 -0.16%
27. Feb 29, 2020 $272.62 -10.66% 2,954.22 -8.41%
28. Mar 31, 2020 $237.10 $3.25 -11.84% 2,584.59 -12.51%
29. Apr 30, 2020 $271.62 14.56% 2,912.43 12.68%
30. May 31, 2020 $291.27 7.23% 3,044.31 4.53%
31. Jun 30, 2020 $315.61 $3.25 9.47% 3,100.29 1.84%
32. Jul 31, 2020 $316.75 0.36% 3,271.12 5.51%
33. Aug 31, 2020 $347.15 9.60% 3,500.31 7.01%
34. Sep 30, 2020 $364.32 $3.25 5.88% 3,363.00 -3.92%
35. Oct 31, 2020 $349.63 -4.03% 3,269.96 -2.77%
36. Nov 30, 2020 $401.58 14.86% 3,621.63 10.75%
37. Dec 31, 2020 $437.85 $3.60 9.93% 3,756.07 3.71%
38. Jan 31, 2021 $450.50 2.89% 3,714.24 -1.11%
39. Feb 28, 2021 $469.87 4.30% 3,811.15 2.61%
40. Mar 31, 2021 $463.66 $3.60 -0.56% 3,972.89 4.24%
41. Apr 30, 2021 $456.20 -1.61% 4,181.17 5.24%
42. May 31, 2021 $472.33 3.54% 4,204.11 0.55%
43. Jun 30, 2021 $476.84 $3.60 1.72% 4,297.50 2.22%
44. Jul 31, 2021 $485.40 1.80% 4,395.26 2.27%
45. Aug 31, 2021 $497.21 2.43% 4,522.68 2.90%
46. Sep 30, 2021 $484.93 $3.60 -1.75% 4,307.54 -4.76%
47. Oct 31, 2021 $531.67 9.64% 4,605.38 6.91%
48. Nov 30, 2021 $553.68 4.14% 4,567.00 -0.83%
49. Dec 31, 2021 $665.41 $4.10 20.92% 4,766.18 4.36%
50. Jan 31, 2022 $585.88 -11.95% 4,515.55 -5.26%
51. Feb 28, 2022 $587.44 0.27% 4,373.94 -3.14%
52. Mar 31, 2022 $629.68 $4.10 7.89% 4,530.41 3.58%
53. Apr 30, 2022 $554.39 -11.96% 4,131.93 -8.80%
54. May 31, 2022 $580.13 4.64% 4,132.15 0.01%
55. Jun 30, 2022 $485.81 $4.10 -15.55% 3,785.38 -8.39%
56. Jul 31, 2022 $535.48 10.22% 4,130.29 9.11%
57. Aug 31, 2022 $499.11 -6.79% 3,955.00 -4.24%
58. Sep 30, 2022 $444.01 $4.10 -10.22% 3,585.62 -9.34%
59. Oct 31, 2022 $470.12 5.88% 3,871.98 7.99%
60. Nov 30, 2022 $551.03 17.21% 4,080.11 5.38%
61. Dec 31, 2022 $559.13 $4.60 2.30% 3,839.50 -5.90%
62. Jan 31, 2023 $585.01 4.63% 4,076.60 6.18%
63. Feb 28, 2023 $594.29 1.59% 3,970.15 -2.61%
64. Mar 31, 2023 $641.54 $4.60 8.72% 4,109.31 3.51%
65. Apr 30, 2023 $626.50 -2.34% 4,169.48 1.46%
66. May 31, 2023 $807.96 28.96% 4,179.83 0.25%
67. Jun 30, 2023 $867.43 $4.60 7.93% 4,376.86 4.71%
68. Jul 31, 2023 $898.65 3.60% 4,588.96 4.85%
69. Aug 31, 2023 $922.89 2.70% 4,507.66 -1.77%
70. Sep 30, 2023 $830.58 $4.60 -9.50% 4,288.05 -4.87%
71. Oct 31, 2023 $841.37 1.30% 4,193.80 -2.20%
Average (R): 2.22% 0.78%
Standard deviation: 8.67% 5.13%

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 AVGO during period t

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


Variance and Covariance

Broadcom Inc., calculation of variance and covariance of returns

Microsoft Excel
t Date RAVGO,t RS&P 500,t (RAVGO,tRAVGO)2 (RS&P 500,tRS&P 500)2 (RAVGO,tRAVGO)×(RS&P 500,tRS&P 500)
1. Dec 31, 2017 -6.94% 0.98% 83.89 0.04 -1.85
2. Jan 31, 2018 -3.45% 5.62% 32.17 23.40 -27.43
3. Feb 28, 2018 -0.63% -3.89% 8.13 21.86 13.33
. . . . . . .
. . . . . . .
. . . . . . .
70. Sep 30, 2023 -9.50% -4.87% 137.42 31.95 66.27
71. Oct 31, 2023 1.30% -2.20% 0.85 8.87 2.74
Total (Σ): 5,262.88 1,843.80 1,962.24
t Date RAVGO,t RS&P 500,t (RAVGO,tRAVGO)2 (RS&P 500,tRS&P 500)2 (RAVGO,tRAVGO)×(RS&P 500,tRS&P 500)
1. Dec 31, 2017 -6.94% 0.98% 83.89 0.04 -1.85
2. Jan 31, 2018 -3.45% 5.62% 32.17 23.40 -27.43
3. Feb 28, 2018 -0.63% -3.89% 8.13 21.86 13.33
4. Mar 31, 2018 -3.68% -2.69% 34.75 12.04 20.45
5. Apr 30, 2018 -2.64% 0.27% 23.65 0.26 2.47
6. May 31, 2018 9.87% 2.16% 58.58 1.90 10.56
7. Jun 30, 2018 -3.05% 0.48% 27.73 0.09 1.56
8. Jul 31, 2018 -8.60% 3.60% 117.08 7.96 -30.53
9. Aug 31, 2018 -1.24% 3.03% 11.93 5.04 -7.76
10. Sep 30, 2018 13.45% 0.43% 126.04 0.12 -3.94
11. Oct 31, 2018 -9.42% -6.94% 135.45 59.62 89.86
12. Nov 30, 2018 6.23% 1.79% 16.08 1.01 4.03
13. Dec 31, 2018 8.22% -9.18% 36.04 99.17 -59.78
14. Jan 31, 2019 5.49% 7.87% 10.73 50.24 23.21
15. Feb 28, 2019 2.65% 2.97% 0.19 4.81 0.95
16. Mar 31, 2019 10.17% 1.79% 63.20 1.02 8.04
17. Apr 30, 2019 5.88% 3.93% 13.42 9.93 11.54
18. May 31, 2019 -20.97% -6.58% 537.60 54.15 170.62
19. Jun 30, 2019 15.45% 6.89% 174.97 37.36 80.85
20. Jul 31, 2019 0.74% 1.31% 2.19 0.28 -0.79
21. Aug 31, 2019 -2.53% -1.81% 22.60 6.71 12.31
22. Sep 30, 2019 -1.39% 1.72% 13.00 0.88 -3.38
23. Oct 31, 2019 6.08% 2.04% 14.89 1.59 4.87
24. Nov 30, 2019 7.98% 3.40% 33.15 6.89 15.11
25. Dec 31, 2019 0.97% 2.86% 1.57 4.32 -2.60
26. Jan 31, 2020 -3.44% -0.16% 31.98 0.89 5.34
27. Feb 29, 2020 -10.66% -8.41% 165.95 84.49 118.41
28. Mar 31, 2020 -11.84% -12.51% 197.57 176.70 186.84
29. Apr 30, 2020 14.56% 12.68% 152.28 141.70 146.89
30. May 31, 2020 7.23% 4.53% 25.15 14.04 18.79
31. Jun 30, 2020 9.47% 1.84% 52.61 1.12 7.67
32. Jul 31, 2020 0.36% 5.51% 3.45 22.37 -8.79
33. Aug 31, 2020 9.60% 7.01% 54.44 38.76 45.94
34. Sep 30, 2020 5.88% -3.92% 13.42 22.12 -17.23
35. Oct 31, 2020 -4.03% -2.77% 39.08 12.58 22.17
36. Nov 30, 2020 14.86% 10.75% 159.76 99.48 126.07
37. Dec 31, 2020 9.93% 3.71% 59.43 8.59 22.60
38. Jan 31, 2021 2.89% -1.11% 0.45 3.59 -1.27
39. Feb 28, 2021 4.30% 2.61% 4.33 3.34 3.80
40. Mar 31, 2021 -0.56% 4.24% 7.70 11.99 -9.61
41. Apr 30, 2021 -1.61% 5.24% 14.65 19.91 -17.08
42. May 31, 2021 3.54% 0.55% 1.73 0.05 -0.31
43. Jun 30, 2021 1.72% 2.22% 0.25 2.08 -0.72
44. Jul 31, 2021 1.80% 2.27% 0.18 2.23 -0.63
45. Aug 31, 2021 2.43% 2.90% 0.05 4.49 0.45
46. Sep 30, 2021 -1.75% -4.76% 15.72 30.67 21.96
47. Oct 31, 2021 9.64% 6.91% 55.05 37.62 45.51
48. Nov 30, 2021 4.14% -0.83% 3.69 2.61 -3.10
49. Dec 31, 2021 20.92% 4.36% 349.73 12.82 66.96
50. Jan 31, 2022 -11.95% -5.26% 200.82 36.47 85.58
51. Feb 28, 2022 0.27% -3.14% 3.81 15.34 7.65
52. Mar 31, 2022 7.89% 3.58% 32.14 7.82 15.86
53. Apr 30, 2022 -11.96% -8.80% 200.95 91.71 135.75
54. May 31, 2022 4.64% 0.01% 5.88 0.60 -1.88
55. Jun 30, 2022 -15.55% -8.39% 315.80 84.14 163.01
56. Jul 31, 2022 10.22% 9.11% 64.08 69.40 66.69
57. Aug 31, 2022 -6.79% -4.24% 81.20 25.25 45.28
58. Sep 30, 2022 -10.22% -9.34% 154.68 102.42 125.87
59. Oct 31, 2022 5.88% 7.99% 13.41 51.92 26.38
60. Nov 30, 2022 17.21% 5.38% 224.75 21.11 68.88
61. Dec 31, 2022 2.30% -5.90% 0.01 44.59 -0.57
62. Jan 31, 2023 4.63% 6.18% 5.81 29.10 13.00
63. Feb 28, 2023 1.59% -2.61% 0.40 11.51 2.15
64. Mar 31, 2023 8.72% 3.51% 42.32 7.42 17.72
65. Apr 30, 2023 -2.34% 1.46% 20.82 0.47 -3.12
66. May 31, 2023 28.96% 0.25% 715.30 0.28 -14.24
67. Jun 30, 2023 7.93% 4.71% 32.61 15.47 22.46
68. Jul 31, 2023 3.60% 4.85% 1.90 16.53 5.61
69. Aug 31, 2023 2.70% -1.77% 0.23 6.51 -1.22
70. Sep 30, 2023 -9.50% -4.87% 137.42 31.95 66.27
71. Oct 31, 2023 1.30% -2.20% 0.85 8.87 2.74
Total (Σ): 5,262.88 1,843.80 1,962.24

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VarianceAVGO = Σ(RAVGO,tRAVGO)2 ÷ (71 – 1)
= 5,262.88 ÷ (71 – 1)
= 75.18

VarianceS&P 500 = Σ(RS&P 500,tRS&P 500)2 ÷ (71 – 1)
= 1,843.80 ÷ (71 – 1)
= 26.34

CovarianceAVGO, S&P 500 = Σ(RAVGO,tRAVGO)×(RS&P 500,tRS&P 500) ÷ (71 – 1)
= 1,962.24 ÷ (71 – 1)
= 28.03


Systematic Risk (β) Estimation

Microsoft Excel
VarianceAVGO 75.18
VarianceS&P 500 26.34
CovarianceAVGO, S&P 500 28.03
Correlation coefficientAVGO, S&P 5001 0.63
βAVGO2 1.06
αAVGO3 1.39%

Calculations

1 Correlation coefficientAVGO, S&P 500
= CovarianceAVGO, S&P 500 ÷ (Standard deviationAVGO × Standard deviationS&P 500)
= 28.03 ÷ (8.67% × 5.13%)
= 0.63

2 βAVGO
= CovarianceAVGO, S&P 500 ÷ VarianceS&P 500
= 28.03 ÷ 26.34
= 1.06

3 αAVGO
= AverageAVGO – βAVGO × AverageS&P 500
= 2.22%1.06 × 0.78%
= 1.39%


Expected Rate of Return

Microsoft Excel
Assumptions
Rate of return on LT Treasury Composite1 RF 4.43%
Expected rate of return on market portfolio2 E(RM) 13.60%
Systematic risk (β) of Broadcom Inc. common stock βAVGO 1.06
 
Expected rate of return on Broadcom Inc. common stock3 E(RAVGO) 14.19%

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(RAVGO) = RF + βAVGO [E(RM) – RF]
= 4.43% + 1.06 [13.60%4.43%]
= 14.19%