Stock Analysis on Net
Stock Analysis on Net

Microsoft Corp. (NASDAQ:MSFT)

Capital Asset Pricing Model (CAPM)

Microsoft Excel LibreOffice Calc

Rates of Return

Microsoft Corp., monthly rates of return

Microsoft Excel LibreOffice Calc
Microsoft Corp. (MSFT) Standard & Poor’s 500 (S&P 500)
t Date PriceMSFT,t1 DividendMSFT,t1 RMSFT,t2 PriceS&P 500,t RS&P 500,t3
Jul 31, 2015 $46.70 2,103.84
1. Aug 31, 2015 $43.52 $0.31 -6.15% 1,972.18 -6.26%
2. Sep 30, 2015 $44.26 1.70% 1,920.03 -2.64%
3. Oct 31, 2015 $52.64 18.93% 2,079.36 8.30%
. . . . . . .
. . . . . . .
. . . . . . .
70. May 31, 2021 $249.68 $0.56 -0.77% 4,204.11 0.55%
71. Jun 30, 2021 $270.90 8.50% 4,297.50 2.22%
Average (R): 2.81% 1.10%
Standard deviation: 5.43% 4.32%
Microsoft Corp. (MSFT) Standard & Poor’s 500 (S&P 500)
t Date PriceMSFT,t1 DividendMSFT,t1 RMSFT,t2 PriceS&P 500,t RS&P 500,t3
Jul 31, 2015 $46.70 2,103.84
1. Aug 31, 2015 $43.52 $0.31 -6.15% 1,972.18 -6.26%
2. Sep 30, 2015 $44.26 1.70% 1,920.03 -2.64%
3. Oct 31, 2015 $52.64 18.93% 2,079.36 8.30%
4. Nov 30, 2015 $54.35 $0.36 3.93% 2,080.41 0.05%
5. Dec 31, 2015 $55.48 2.08% 2,043.94 -1.75%
6. Jan 31, 2016 $55.09 -0.70% 1,940.24 -5.07%
7. Feb 29, 2016 $50.88 $0.36 -6.99% 1,932.23 -0.41%
8. Mar 31, 2016 $55.23 8.55% 2,059.74 6.60%
9. Apr 30, 2016 $49.87 -9.70% 2,065.30 0.27%
10. May 31, 2016 $53.00 $0.36 7.00% 2,096.95 1.53%
11. Jun 30, 2016 $51.17 -3.45% 2,098.86 0.09%
12. Jul 31, 2016 $56.68 10.77% 2,173.60 3.56%
13. Aug 31, 2016 $57.46 $0.36 2.01% 2,170.95 -0.12%
14. Sep 30, 2016 $57.60 0.24% 2,168.27 -0.12%
15. Oct 31, 2016 $59.92 4.03% 2,126.15 -1.94%
16. Nov 30, 2016 $60.26 $0.39 1.22% 2,198.81 3.42%
17. Dec 31, 2016 $62.14 3.12% 2,238.83 1.82%
18. Jan 31, 2017 $64.65 4.04% 2,278.87 1.79%
19. Feb 28, 2017 $63.98 $0.39 -0.43% 2,363.64 3.72%
20. Mar 31, 2017 $65.86 2.94% 2,362.72 -0.04%
21. Apr 30, 2017 $68.46 3.95% 2,384.20 0.91%
22. May 31, 2017 $69.84 $0.39 2.59% 2,411.80 1.16%
23. Jun 30, 2017 $68.93 -1.30% 2,423.41 0.48%
24. Jul 31, 2017 $72.70 5.47% 2,470.30 1.93%
25. Aug 31, 2017 $74.77 $0.39 3.38% 2,471.65 0.05%
26. Sep 30, 2017 $74.49 -0.37% 2,519.36 1.93%
27. Oct 31, 2017 $83.18 11.67% 2,575.26 2.22%
28. Nov 30, 2017 $84.17 $0.42 1.70% 2,647.58 2.81%
29. Dec 31, 2017 $85.54 1.63% 2,673.61 0.98%
30. Jan 31, 2018 $95.01 11.07% 2,823.81 5.62%
31. Feb 28, 2018 $93.77 $0.42 -0.86% 2,713.83 -3.89%
32. Mar 31, 2018 $91.27 -2.67% 2,640.87 -2.69%
33. Apr 30, 2018 $93.52 2.47% 2,648.05 0.27%
34. May 31, 2018 $98.84 $0.42 6.14% 2,705.27 2.16%
35. Jun 30, 2018 $98.61 -0.23% 2,718.37 0.48%
36. Jul 31, 2018 $106.08 7.58% 2,816.29 3.60%
37. Aug 31, 2018 $112.33 $0.42 6.29% 2,901.52 3.03%
38. Sep 30, 2018 $114.37 1.82% 2,913.98 0.43%
39. Oct 31, 2018 $106.81 -6.61% 2,711.74 -6.94%
40. Nov 30, 2018 $110.89 $0.46 4.25% 2,760.17 1.79%
41. Dec 31, 2018 $101.57 -8.40% 2,506.85 -9.18%
42. Jan 31, 2019 $104.43 2.82% 2,704.10 7.87%
43. Feb 28, 2019 $112.03 $0.46 7.72% 2,784.49 2.97%
44. Mar 31, 2019 $117.94 5.28% 2,834.40 1.79%
45. Apr 30, 2019 $130.60 10.73% 2,945.83 3.93%
46. May 31, 2019 $123.68 $0.46 -4.95% 2,752.06 -6.58%
47. Jun 30, 2019 $133.96 8.31% 2,941.76 6.89%
48. Jul 31, 2019 $136.27 1.72% 2,980.38 1.31%
49. Aug 31, 2019 $137.86 $0.46 1.50% 2,926.46 -1.81%
50. Sep 30, 2019 $139.03 0.85% 2,976.74 1.72%
51. Oct 31, 2019 $143.37 3.12% 3,037.56 2.04%
52. Nov 30, 2019 $151.38 $0.51 5.94% 3,140.98 3.40%
53. Dec 31, 2019 $157.70 4.17% 3,230.78 2.86%
54. Jan 31, 2020 $170.23 7.95% 3,225.52 -0.16%
55. Feb 29, 2020 $162.01 $0.51 -4.53% 2,954.22 -8.41%
56. Mar 31, 2020 $157.71 -2.65% 2,584.59 -12.51%
57. Apr 30, 2020 $179.21 13.63% 2,912.43 12.68%
58. May 31, 2020 $183.25 $0.51 2.54% 3,044.31 4.53%
59. Jun 30, 2020 $203.51 11.06% 3,100.29 1.84%
60. Jul 31, 2020 $205.01 0.74% 3,271.12 5.51%
61. Aug 31, 2020 $225.53 $0.51 10.26% 3,500.31 7.01%
62. Sep 30, 2020 $210.33 -6.74% 3,363.00 -3.92%
63. Oct 31, 2020 $202.47 -3.74% 3,269.96 -2.77%
64. Nov 30, 2020 $214.07 $0.56 6.01% 3,621.63 10.75%
65. Dec 31, 2020 $222.42 3.90% 3,756.07 3.71%
66. Jan 31, 2021 $231.96 4.29% 3,714.24 -1.11%
67. Feb 28, 2021 $232.38 $0.56 0.42% 3,811.15 2.61%
68. Mar 31, 2021 $235.77 1.46% 3,972.89 4.24%
69. Apr 30, 2021 $252.18 6.96% 4,181.17 5.24%
70. May 31, 2021 $249.68 $0.56 -0.77% 4,204.11 0.55%
71. Jun 30, 2021 $270.90 8.50% 4,297.50 2.22%
Average (R): 2.81% 1.10%
Standard deviation: 5.43% 4.32%

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 MSFT during period t

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


Variance and Covariance

Microsoft Corp., calculation of variance and covariance of returns

Microsoft Excel LibreOffice Calc
t Date RMSFT,t RS&P 500,t (RMSFT,tRMSFT)2 (RS&P 500,tRS&P 500)2 (RMSFT,tRMSFT)×(RS&P 500,tRS&P 500)
1. Aug 31, 2015 -6.15% -6.26% 80.11 54.19 65.89
2. Sep 30, 2015 1.70% -2.64% 1.22 14.05 4.14
3. Oct 31, 2015 18.93% 8.30% 260.13 51.76 116.04
. . . . . . .
. . . . . . .
. . . . . . .
70. May 31, 2021 -0.77% 0.55% 12.78 0.31 1.98
71. Jun 30, 2021 8.50% 2.22% 32.42 1.25 6.36
Total (Σ): 2,060.54 1,307.41 1,146.72
t Date RMSFT,t RS&P 500,t (RMSFT,tRMSFT)2 (RS&P 500,tRS&P 500)2 (RMSFT,tRMSFT)×(RS&P 500,tRS&P 500)
1. Aug 31, 2015 -6.15% -6.26% 80.11 54.19 65.89
2. Sep 30, 2015 1.70% -2.64% 1.22 14.05 4.14
3. Oct 31, 2015 18.93% 8.30% 260.13 51.76 116.04
4. Nov 30, 2015 3.93% 0.05% 1.27 1.11 -1.19
5. Dec 31, 2015 2.08% -1.75% 0.53 8.16 2.07
6. Jan 31, 2016 -0.70% -5.07% 12.31 38.16 21.67
7. Feb 29, 2016 -6.99% -0.41% 95.91 2.30 14.85
8. Mar 31, 2016 8.55% 6.60% 33.00 30.20 31.57
9. Apr 30, 2016 -9.70% 0.27% 156.50 0.69 10.43
10. May 31, 2016 7.00% 1.53% 17.58 0.18 1.80
11. Jun 30, 2016 -3.45% 0.09% 39.16 1.03 6.34
12. Jul 31, 2016 10.77% 3.56% 63.41 6.04 19.57
13. Aug 31, 2016 2.01% -0.12% 0.63 1.50 0.97
14. Sep 30, 2016 0.24% -0.12% 6.56 1.51 3.14
15. Oct 31, 2016 4.03% -1.94% 1.50 9.28 -3.72
16. Nov 30, 2016 1.22% 3.42% 2.52 5.35 -3.67
17. Dec 31, 2016 3.12% 1.82% 0.10 0.51 0.23
18. Jan 31, 2017 4.04% 1.79% 1.52 0.47 0.85
19. Feb 28, 2017 -0.43% 3.72% 10.49 6.84 -8.47
20. Mar 31, 2017 2.94% -0.04% 0.02 1.31 -0.15
21. Apr 30, 2017 3.95% 0.91% 1.31 0.04 -0.22
22. May 31, 2017 2.59% 1.16% 0.05 0.00 -0.01
23. Jun 30, 2017 -1.30% 0.48% 16.88 0.39 2.56
24. Jul 31, 2017 5.47% 1.93% 7.10 0.69 2.21
25. Aug 31, 2017 3.38% 0.05% 0.33 1.10 -0.61
26. Sep 30, 2017 -0.37% 1.93% 10.11 0.68 -2.63
27. Oct 31, 2017 11.67% 2.22% 78.52 1.24 9.88
28. Nov 30, 2017 1.70% 2.81% 1.23 2.91 -1.89
29. Dec 31, 2017 1.63% 0.98% 1.39 0.01 0.14
30. Jan 31, 2018 11.07% 5.62% 68.32 20.38 37.31
31. Feb 28, 2018 -0.86% -3.89% 13.45 24.98 18.33
32. Mar 31, 2018 -2.67% -2.69% 29.93 14.38 20.75
33. Apr 30, 2018 2.47% 0.27% 0.12 0.69 0.28
34. May 31, 2018 6.14% 2.16% 11.11 1.12 3.52
35. Jun 30, 2018 -0.23% 0.48% 9.23 0.38 1.88
36. Jul 31, 2018 7.58% 3.60% 22.76 6.24 11.92
37. Aug 31, 2018 6.29% 3.03% 12.13 3.70 6.70
38. Sep 30, 2018 1.82% 0.43% 0.98 0.45 0.67
39. Oct 31, 2018 -6.61% -6.94% 88.64 64.70 75.73
40. Nov 30, 2018 4.25% 1.79% 2.09 0.47 0.99
41. Dec 31, 2018 -8.40% -9.18% 125.66 105.71 115.25
42. Jan 31, 2019 2.82% 7.87% 0.00 45.76 0.07
43. Feb 28, 2019 7.72% 2.97% 24.14 3.49 9.18
44. Mar 31, 2019 5.28% 1.79% 6.10 0.47 1.70
45. Apr 30, 2019 10.73% 3.93% 62.87 8.00 22.42
46. May 31, 2019 -4.95% -6.58% 60.08 59.00 59.54
47. Jun 30, 2019 8.31% 6.89% 30.32 33.52 31.88
48. Jul 31, 2019 1.72% 1.31% 1.17 0.04 -0.23
49. Aug 31, 2019 1.50% -1.81% 1.69 8.48 3.79
50. Sep 30, 2019 0.85% 1.72% 3.83 0.38 -1.20
51. Oct 31, 2019 3.12% 2.04% 0.10 0.88 0.30
52. Nov 30, 2019 5.94% 3.40% 9.84 5.30 7.22
53. Dec 31, 2019 4.17% 2.86% 1.88 3.08 2.40
54. Jan 31, 2020 7.95% -0.16% 26.42 1.60 -6.51
55. Feb 29, 2020 -4.53% -8.41% 53.79 90.53 69.78
56. Mar 31, 2020 -2.65% -12.51% 29.80 185.38 74.33
57. Apr 30, 2020 13.63% 12.68% 117.24 134.12 125.39
58. May 31, 2020 2.54% 4.53% 0.07 11.73 -0.91
59. Jun 30, 2020 11.06% 1.84% 68.08 0.54 6.07
60. Jul 31, 2020 0.74% 5.51% 4.28 19.42 -9.11
61. Aug 31, 2020 10.26% 7.01% 55.55 34.84 43.99
62. Sep 30, 2020 -6.74% -3.92% 91.10 25.26 47.98
63. Oct 31, 2020 -3.74% -2.77% 42.80 14.98 25.32
64. Nov 30, 2020 6.01% 10.75% 10.25 93.14 30.89
65. Dec 31, 2020 3.90% 3.71% 1.20 6.80 2.86
66. Jan 31, 2021 4.29% -1.11% 2.20 4.92 -3.29
67. Feb 28, 2021 0.42% 2.61% 5.68 2.27 -3.59
68. Mar 31, 2021 1.46% 4.24% 1.81 9.86 -4.23
69. Apr 30, 2021 6.96% 5.24% 17.27 17.13 17.20
70. May 31, 2021 -0.77% 0.55% 12.78 0.31 1.98
71. Jun 30, 2021 8.50% 2.22% 32.42 1.25 6.36
Total (Σ): 2,060.54 1,307.41 1,146.72

Show all

VarianceMSFT = Σ(RMSFT,tRMSFT)2 ÷ (71 – 1)
= 2,060.54 ÷ (71 – 1)
= 29.44

VarianceS&P 500 = Σ(RS&P 500,tRS&P 500)2 ÷ (71 – 1)
= 1,307.41 ÷ (71 – 1)
= 18.68

CovarianceMSFT, S&P 500 = Σ(RMSFT,tRMSFT)×(RS&P 500,tRS&P 500) ÷ (71 – 1)
= 1,146.72 ÷ (71 – 1)
= 16.38


Systematic Risk (β) Estimation

Microsoft Excel LibreOffice Calc
VarianceMSFT 29.44
VarianceS&P 500 18.68
CovarianceMSFT, S&P 500 16.38
Correlation coefficientMSFT, S&P 5001 0.70
βMSFT2 0.88
αMSFT3 1.84%

Calculations

1 Correlation coefficientMSFT, S&P 500
= CovarianceMSFT, S&P 500 ÷ (Standard deviationMSFT × Standard deviationS&P 500)
= 16.38 ÷ (5.43% × 4.32%)
= 0.70

2 βMSFT
= CovarianceMSFT, S&P 500 ÷ VarianceS&P 500
= 16.38 ÷ 18.68
= 0.88

3 αMSFT
= AverageMSFT – βMSFT × AverageS&P 500
= 2.81%0.88 × 1.10%
= 1.84%


Expected Rate of Return

Microsoft Excel LibreOffice Calc
Assumptions
Rate of return on LT Treasury Composite1 RF 2.02%
Expected rate of return on market portfolio2 E(RM) 11.66%
Systematic risk (β) of Microsoft Corp.’s common stock βMSFT 0.88
 
Expected rate of return on Microsoft Corp.’s common stock3 E(RMSFT) 10.47%

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(RMSFT) = RF + βMSFT [E(RM) – RF]
= 2.02% + 0.88 [11.66%2.02%]
= 10.47%