Microsoft Excel LibreOffice Calc

Gilead Sciences Inc. (NASDAQ:GILD)


Capital Asset Pricing Model (CAPM)

Intermediate level


Rates of Return

Gilead Sciences Inc., monthly rates of return

Microsoft Excel LibreOffice Calc
Gilead Sciences Inc. (GILD) Standard & Poor’s 500 (S&P 500)
t Date PriceGILD,t1 DividendGILD,t1 RGILD,t2 PriceS&P 500,t RS&P 500,t3
Jan 31, 2015 104.83 1,994.99
1. Feb 28, 2015 103.53 -1.24% 2,104.50 5.49%
2. Mar 31, 2015 98.13 -5.22% 2,067.89 -1.74%
3. Apr 30, 2015 100.51 2.43% 2,085.51 0.85%
. . . . . . .
. . . . . . .
. . . . . . .
58. Nov 30, 2019 67.24 5.54% 3,140.98 3.40%
59. Dec 31, 2019 64.98 0.63 -2.42% 3,230.78 2.86%
Average: -0.37% 0.88%
Standard deviation: 6.64% 3.45%
Gilead Sciences Inc. (GILD) Standard & Poor’s 500 (S&P 500)
t Date PriceGILD,t1 DividendGILD,t1 RGILD,t2 PriceS&P 500,t RS&P 500,t3
Jan 31, 2015 104.83 1,994.99
1. Feb 28, 2015 103.53 -1.24% 2,104.50 5.49%
2. Mar 31, 2015 98.13 -5.22% 2,067.89 -1.74%
3. Apr 30, 2015 100.51 2.43% 2,085.51 0.85%
4. May 31, 2015 112.27 11.70% 2,107.39 1.05%
5. Jun 30, 2015 117.08 0.43 4.67% 2,063.11 -2.10%
6. Jul 31, 2015 117.86 0.67% 2,103.84 1.97%
7. Aug 31, 2015 105.07 -10.85% 1,972.18 -6.26%
8. Sep 30, 2015 98.19 0.43 -6.14% 1,920.03 -2.64%
9. Oct 31, 2015 108.13 10.12% 2,079.36 8.30%
10. Nov 30, 2015 105.96 -2.01% 2,080.41 0.05%
11. Dec 31, 2015 101.19 0.43 -4.10% 2,043.94 -1.75%
12. Jan 31, 2016 83.00 -17.98% 1,940.24 -5.07%
13. Feb 29, 2016 87.25 5.12% 1,932.23 -0.41%
14. Mar 31, 2016 91.86 0.43 5.78% 2,059.74 6.60%
15. Apr 30, 2016 88.21 -3.97% 2,065.30 0.27%
16. May 31, 2016 87.06 -1.30% 2,096.95 1.53%
17. Jun 30, 2016 83.42 0.47 -3.64% 2,098.86 0.09%
18. Jul 31, 2016 79.47 -4.74% 2,173.60 3.56%
19. Aug 31, 2016 78.38 -1.37% 2,170.95 -0.12%
20. Sep 30, 2016 79.12 0.47 1.54% 2,168.27 -0.12%
21. Oct 31, 2016 73.63 -6.94% 2,126.15 -1.94%
22. Nov 30, 2016 73.70 0.10% 2,198.81 3.42%
23. Dec 31, 2016 71.61 0.47 -2.20% 2,238.83 1.82%
24. Jan 31, 2017 72.45 1.17% 2,278.87 1.79%
25. Feb 28, 2017 70.48 -2.72% 2,363.64 3.72%
26. Mar 31, 2017 67.92 0.52 -2.89% 2,362.72 -0.04%
27. Apr 30, 2017 68.55 0.93% 2,384.20 0.91%
28. May 31, 2017 64.89 -5.34% 2,411.80 1.16%
29. Jun 30, 2017 70.78 0.52 9.88% 2,423.41 0.48%
30. Jul 31, 2017 76.09 7.50% 2,470.30 1.93%
31. Aug 31, 2017 83.71 10.01% 2,471.65 0.05%
32. Sep 30, 2017 81.02 0.52 -2.59% 2,519.36 1.93%
33. Oct 31, 2017 74.96 -7.48% 2,575.26 2.22%
34. Nov 30, 2017 74.78 -0.24% 2,647.58 2.81%
35. Dec 31, 2017 71.64 0.52 -3.50% 2,673.61 0.98%
36. Jan 31, 2018 83.80 16.97% 2,823.81 5.62%
37. Feb 28, 2018 78.73 -6.05% 2,713.83 -3.89%
38. Mar 31, 2018 75.39 0.57 -3.52% 2,640.87 -2.69%
39. Apr 30, 2018 72.23 -4.19% 2,648.05 0.27%
40. May 31, 2018 67.40 -6.69% 2,705.27 2.16%
41. Jun 30, 2018 70.84 0.57 5.95% 2,718.37 0.48%
42. Jul 31, 2018 77.83 9.87% 2,816.29 3.60%
43. Aug 31, 2018 75.73 -2.70% 2,901.52 3.03%
44. Sep 30, 2018 77.21 0.57 2.71% 2,913.98 0.43%
45. Oct 31, 2018 68.18 -11.70% 2,711.74 -6.94%
46. Nov 30, 2018 71.94 5.51% 2,760.17 1.79%
47. Dec 31, 2018 62.55 0.57 -12.26% 2,506.85 -9.18%
48. Jan 31, 2019 70.01 11.93% 2,704.10 7.87%
49. Feb 28, 2019 65.02 -7.13% 2,784.49 2.97%
50. Mar 31, 2019 65.01 0.63 0.95% 2,834.40 1.79%
51. Apr 30, 2019 65.04 0.05% 2,945.83 3.93%
52. May 31, 2019 62.25 -4.29% 2,752.06 -6.58%
53. Jun 30, 2019 67.56 0.63 9.54% 2,941.76 6.89%
54. Jul 31, 2019 65.52 -3.02% 2,980.38 1.31%
55. Aug 31, 2019 63.54 -3.02% 2,926.46 -1.81%
56. Sep 30, 2019 63.38 0.63 0.74% 2,976.74 1.72%
57. Oct 31, 2019 63.71 0.52% 3,037.56 2.04%
58. Nov 30, 2019 67.24 5.54% 3,140.98 3.40%
59. Dec 31, 2019 64.98 0.63 -2.42% 3,230.78 2.86%
Average: -0.37% 0.88%
Standard deviation: 6.64% 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 GILD during period t

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


Systematic Risk (β) Estimation

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VarianceGILD 44.08
VarianceS&P 500 11.88
CovarianceGILD, S&P 500 14.34
Correlation coefficientGILD, S&P 5001 0.63
βGILD2 1.21
αGILD3 -1.43

Calculations

1 Correlation coefficientGILD, S&P 500
= CovarianceGILD, S&P 500 ÷ (Standard deviationGILD × Standard deviationS&P 500)
= 14.34 ÷ (6.64 × 3.45)

2 βGILD
= CovarianceGILD, S&P 500 ÷ VarianceS&P 500
= 14.34 ÷ 11.88

3 αGILD
= AverageGILD – βGILD × AverageS&P 500
= -0.371.21 × 0.88


Expected Rate of Return

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Assumptions
Rate of return on LT Treasury Composite1 RF 1.26%
Expected rate of return on market portfolio2 E(RM) 11.93%
Systematic risk (β) of Gilead Sciences Inc.’s common stock βGILD 1.21
 
Expected rate of return on Gilead Sciences Inc.’s common stock3 E(RGILD) 14.14%

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(RGILD) = RF + βGILD [E(RM) – RF]
= 1.26% + 1.21 [11.93%1.26%]
= 14.14%