Stock Analysis on Net

Abbott Laboratories (NYSE:ABT)

Capital Asset Pricing Model (CAPM) 

Microsoft Excel

Rates of Return

Abbott Laboratories, monthly rates of return

Microsoft Excel
Abbott Laboratories (ABT) Standard & Poor’s 500 (S&P 500)
t Date PriceABT,t1 DividendABT,t1 RABT,t2 PriceS&P 500,t RS&P 500,t3
Jan 31, 2019 $72.98 2,704.10
1. Feb 28, 2019 $77.62 6.36% 2,784.49 2.97%
2. Mar 31, 2019 $79.94 2.99% 2,834.40 1.79%
3. Apr 30, 2019 $79.56 $0.32 -0.08% 2,945.83 3.93%
. . . . . . .
. . . . . . .
. . . . . . .
58. Nov 30, 2023 $104.29 10.30% 4,567.80 8.92%
59. Dec 31, 2023 $110.07 5.54% 4,769.83 4.42%
Average (R): 1.01% 1.11%
Standard deviation: 6.14% 5.31%
Abbott Laboratories (ABT) Standard & Poor’s 500 (S&P 500)
t Date PriceABT,t1 DividendABT,t1 RABT,t2 PriceS&P 500,t RS&P 500,t3
Jan 31, 2019 $72.98 2,704.10
1. Feb 28, 2019 $77.62 6.36% 2,784.49 2.97%
2. Mar 31, 2019 $79.94 2.99% 2,834.40 1.79%
3. Apr 30, 2019 $79.56 $0.32 -0.08% 2,945.83 3.93%
4. May 31, 2019 $76.13 -4.31% 2,752.06 -6.58%
5. Jun 30, 2019 $84.10 10.47% 2,941.76 6.89%
6. Jul 31, 2019 $87.10 $0.32 3.95% 2,980.38 1.31%
7. Aug 31, 2019 $85.32 -2.04% 2,926.46 -1.81%
8. Sep 30, 2019 $83.67 -1.93% 2,976.74 1.72%
9. Oct 31, 2019 $83.61 $0.32 0.31% 3,037.56 2.04%
10. Nov 30, 2019 $85.45 2.20% 3,140.98 3.40%
11. Dec 31, 2019 $86.86 1.65% 3,230.78 2.86%
12. Jan 31, 2020 $87.14 $0.36 0.74% 3,225.52 -0.16%
13. Feb 29, 2020 $77.03 -11.60% 2,954.22 -8.41%
14. Mar 31, 2020 $78.91 2.44% 2,584.59 -12.51%
15. Apr 30, 2020 $92.09 $0.36 17.16% 2,912.43 12.68%
16. May 31, 2020 $94.92 3.07% 3,044.31 4.53%
17. Jun 30, 2020 $91.43 -3.68% 3,100.29 1.84%
18. Jul 31, 2020 $100.64 $0.36 10.47% 3,271.12 5.51%
19. Aug 31, 2020 $109.47 8.77% 3,500.31 7.01%
20. Sep 30, 2020 $108.83 -0.58% 3,363.00 -3.92%
21. Oct 31, 2020 $105.11 $0.36 -3.09% 3,269.96 -2.77%
22. Nov 30, 2020 $108.22 2.96% 3,621.63 10.75%
23. Dec 31, 2020 $109.49 1.17% 3,756.07 3.71%
24. Jan 31, 2021 $123.59 $0.45 13.29% 3,714.24 -1.11%
25. Feb 28, 2021 $119.78 -3.08% 3,811.15 2.61%
26. Mar 31, 2021 $119.84 0.05% 3,972.89 4.24%
27. Apr 30, 2021 $120.08 $0.45 0.58% 4,181.17 5.24%
28. May 31, 2021 $116.65 -2.86% 4,204.11 0.55%
29. Jun 30, 2021 $115.93 -0.62% 4,297.50 2.22%
30. Jul 31, 2021 $120.98 $0.45 4.74% 4,395.26 2.27%
31. Aug 31, 2021 $126.37 4.46% 4,522.68 2.90%
32. Sep 30, 2021 $118.13 -6.52% 4,307.54 -4.76%
33. Oct 31, 2021 $128.89 $0.45 9.49% 4,605.38 6.91%
34. Nov 30, 2021 $125.77 -2.42% 4,567.00 -0.83%
35. Dec 31, 2021 $140.74 11.90% 4,766.18 4.36%
36. Jan 31, 2022 $127.46 $0.47 -9.10% 4,515.55 -5.26%
37. Feb 28, 2022 $120.62 -5.37% 4,373.94 -3.14%
38. Mar 31, 2022 $118.36 -1.87% 4,530.41 3.58%
39. Apr 30, 2022 $113.50 $0.47 -3.71% 4,131.93 -8.80%
40. May 31, 2022 $117.46 3.49% 4,132.15 0.01%
41. Jun 30, 2022 $108.65 -7.50% 3,785.38 -8.39%
42. Jul 31, 2022 $108.84 $0.47 0.61% 4,130.29 9.11%
43. Aug 31, 2022 $102.65 -5.69% 3,955.00 -4.24%
44. Sep 30, 2022 $96.76 -5.74% 3,585.62 -9.34%
45. Oct 31, 2022 $98.94 $0.47 2.74% 3,871.98 7.99%
46. Nov 30, 2022 $107.58 8.73% 4,080.11 5.38%
47. Dec 31, 2022 $109.79 2.05% 3,839.50 -5.90%
48. Jan 31, 2023 $110.55 $0.51 1.16% 4,076.60 6.18%
49. Feb 28, 2023 $101.72 -7.99% 3,970.15 -2.61%
50. Mar 31, 2023 $101.26 -0.45% 4,109.31 3.51%
51. Apr 30, 2023 $110.47 $0.51 9.60% 4,169.48 1.46%
52. May 31, 2023 $102.00 -7.67% 4,179.83 0.25%
53. Jun 30, 2023 $109.02 6.88% 4,376.86 4.71%
54. Jul 31, 2023 $111.33 $0.51 2.59% 4,588.96 4.85%
55. Aug 31, 2023 $102.90 -7.57% 4,507.66 -1.77%
56. Sep 30, 2023 $96.85 -5.88% 4,288.05 -4.87%
57. Oct 31, 2023 $94.55 $0.51 -1.85% 4,193.80 -2.20%
58. Nov 30, 2023 $104.29 10.30% 4,567.80 8.92%
59. Dec 31, 2023 $110.07 5.54% 4,769.83 4.42%
Average (R): 1.01% 1.11%
Standard deviation: 6.14% 5.31%

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1 Data in US$ per share of common stock, adjusted for splits and stock dividends.

2 Rate of return on common stock of ABT during period t

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


Variance and Covariance

Abbott Laboratories, calculation of variance and covariance of returns

Microsoft Excel
t Date RABT,t RS&P 500,t (RABT,tRABT)2 (RS&P 500,tRS&P 500)2 (RABT,tRABT)×(RS&P 500,tRS&P 500)
1. Feb 28, 2019 6.36% 2.97% 28.58 3.49 9.98
2. Mar 31, 2019 2.99% 1.79% 3.91 0.47 1.36
3. Apr 30, 2019 -0.08% 3.93% 1.18 7.98 -3.07
. . . . . . .
. . . . . . .
. . . . . . .
58. Nov 30, 2023 10.30% 8.92% 86.29 61.03 72.57
59. Dec 31, 2023 5.54% 4.42% 20.52 11.00 15.03
Total (Σ): 2,184.19 1,634.30 1,226.05
t Date RABT,t RS&P 500,t (RABT,tRABT)2 (RS&P 500,tRS&P 500)2 (RABT,tRABT)×(RS&P 500,tRS&P 500)
1. Feb 28, 2019 6.36% 2.97% 28.58 3.49 9.98
2. Mar 31, 2019 2.99% 1.79% 3.91 0.47 1.36
3. Apr 30, 2019 -0.08% 3.93% 1.18 7.98 -3.07
4. May 31, 2019 -4.31% -6.58% 28.34 59.04 40.90
5. Jun 30, 2019 10.47% 6.89% 89.43 33.49 54.73
6. Jul 31, 2019 3.95% 1.31% 8.62 0.04 0.61
7. Aug 31, 2019 -2.04% -1.81% 9.34 8.50 8.91
8. Sep 30, 2019 -1.93% 1.72% 8.68 0.37 -1.80
9. Oct 31, 2019 0.31% 2.04% 0.49 0.88 -0.66
10. Nov 30, 2019 2.20% 3.40% 1.41 5.28 2.73
11. Dec 31, 2019 1.65% 2.86% 0.41 3.07 1.12
12. Jan 31, 2020 0.74% -0.16% 0.08 1.61 0.35
13. Feb 29, 2020 -11.60% -8.41% 159.11 90.57 120.05
14. Mar 31, 2020 2.44% -12.51% 2.04 185.44 -19.45
15. Apr 30, 2020 17.16% 12.68% 260.72 134.06 186.96
16. May 31, 2020 3.07% 4.53% 4.25 11.71 7.05
17. Jun 30, 2020 -3.68% 1.84% 21.98 0.54 -3.44
18. Jul 31, 2020 10.47% 5.51% 89.40 19.40 41.64
19. Aug 31, 2020 8.77% 7.01% 60.25 34.82 45.80
20. Sep 30, 2020 -0.58% -3.92% 2.55 25.29 8.03
21. Oct 31, 2020 -3.09% -2.77% 16.81 15.00 15.87
22. Nov 30, 2020 2.96% 10.75% 3.79 93.10 18.78
23. Dec 31, 2020 1.17% 3.71% 0.03 6.79 0.42
24. Jan 31, 2021 13.29% -1.11% 150.72 4.93 -27.25
25. Feb 28, 2021 -3.08% 2.61% 16.77 2.26 -6.16
26. Mar 31, 2021 0.05% 4.24% 0.93 9.85 -3.02
27. Apr 30, 2021 0.58% 5.24% 0.19 17.11 -1.80
28. May 31, 2021 -2.86% 0.55% 14.96 0.31 2.16
29. Jun 30, 2021 -0.62% 2.22% 2.65 1.24 -1.82
30. Jul 31, 2021 4.74% 2.27% 13.93 1.37 4.36
31. Aug 31, 2021 4.46% 2.90% 11.86 3.22 6.17
32. Sep 30, 2021 -6.52% -4.76% 56.74 34.37 44.16
33. Oct 31, 2021 9.49% 6.91% 71.87 33.74 49.24
34. Nov 30, 2021 -2.42% -0.83% 11.78 3.76 6.66
35. Dec 31, 2021 11.90% 4.36% 118.61 10.60 35.45
36. Jan 31, 2022 -9.10% -5.26% 102.29 40.51 64.37
37. Feb 28, 2022 -5.37% -3.14% 40.68 17.99 27.06
38. Mar 31, 2022 -1.87% 3.58% 8.33 6.11 -7.13
39. Apr 30, 2022 -3.71% -8.80% 22.29 98.04 46.75
40. May 31, 2022 3.49% 0.01% 6.14 1.21 -2.73
41. Jun 30, 2022 -7.50% -8.39% 72.46 90.21 80.85
42. Jul 31, 2022 0.61% 9.11% 0.16 64.09 -3.24
43. Aug 31, 2022 -5.69% -4.24% 44.88 28.62 35.84
44. Sep 30, 2022 -5.74% -9.34% 45.56 109.11 70.51
45. Oct 31, 2022 2.74% 7.99% 2.98 47.34 11.88
46. Nov 30, 2022 8.73% 5.38% 59.61 18.23 32.96
47. Dec 31, 2022 2.05% -5.90% 1.09 49.04 -7.30
48. Jan 31, 2023 1.16% 6.18% 0.02 25.70 0.73
49. Feb 28, 2023 -7.99% -2.61% 80.99 13.82 33.45
50. Mar 31, 2023 -0.45% 3.51% 2.14 5.76 -3.51
51. Apr 30, 2023 9.60% 1.46% 73.74 0.13 3.08
52. May 31, 2023 -7.67% 0.25% 75.33 0.74 7.44
53. Jun 30, 2023 6.88% 4.71% 34.46 13.02 21.18
54. Jul 31, 2023 2.59% 4.85% 2.48 13.99 5.89
55. Aug 31, 2023 -7.57% -1.77% 73.69 8.28 24.70
56. Sep 30, 2023 -5.88% -4.87% 47.49 35.73 41.20
57. Oct 31, 2023 -1.85% -2.20% 8.18 10.92 9.45
58. Nov 30, 2023 10.30% 8.92% 86.29 61.03 72.57
59. Dec 31, 2023 5.54% 4.42% 20.52 11.00 15.03
Total (Σ): 2,184.19 1,634.30 1,226.05

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VarianceABT = Σ(RABT,tRABT)2 ÷ (59 – 1)
= 2,184.19 ÷ (59 – 1)
= 37.66

VarianceS&P 500 = Σ(RS&P 500,tRS&P 500)2 ÷ (59 – 1)
= 1,634.30 ÷ (59 – 1)
= 28.18

CovarianceABT, S&P 500 = Σ(RABT,tRABT)×(RS&P 500,tRS&P 500) ÷ (59 – 1)
= 1,226.05 ÷ (59 – 1)
= 21.14


Systematic Risk (β) Estimation

Microsoft Excel
VarianceABT 37.66
VarianceS&P 500 28.18
CovarianceABT, S&P 500 21.14
Correlation coefficientABT, S&P 5001 0.65
βABT2 0.75
αABT3 0.18%

Calculations

1 Correlation coefficientABT, S&P 500
= CovarianceABT, S&P 500 ÷ (Standard deviationABT × Standard deviationS&P 500)
= 21.14 ÷ (6.14% × 5.31%)
= 0.65

2 βABT
= CovarianceABT, S&P 500 ÷ VarianceS&P 500
= 21.14 ÷ 28.18
= 0.75

3 αABT
= AverageABT – βABT × AverageS&P 500
= 1.01%0.75 × 1.11%
= 0.18%


Expected Rate of Return

Microsoft Excel
Assumptions
Rate of return on LT Treasury Composite1 RF 4.53%
Expected rate of return on market portfolio2 E(RM) 13.63%
Systematic risk (β) of Abbott Laboratories common stock βABT 0.75
 
Expected rate of return on Abbott Laboratories common stock3 E(RABT) 11.36%

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(RABT) = RF + βABT [E(RM) – RF]
= 4.53% + 0.75 [13.63%4.53%]
= 11.36%