Bristol-Myers Squibb Co. (NYSE:BMY)

Capital Asset Pricing Model (CAPM)

Capital asset pricing model (CAPM) indicates what should be the expected or required rate of return on risky assets like Bristol-Myers Squibb Co. common stock.

Rates of Return
Variance and Covariance
Systematic Risk (β) Estimation
Expected Rate of Return

Rates of Return

Bristol-Myers Squibb Co., monthly rates of return

		Bristol-Myers Squibb Co. (BMY)			Standard & Poor’s 500 (S&P 500)
t	Date	Price_BMY,t¹	Dividend_BMY,t¹	R_BMY,t²	Price_{S&P 500,t}	R_{S&P 500,t}³
	Jan 31, 2020	$62.95			3,225.52
1.	Feb 29, 2020	$59.06		-6.18%	2,954.22	-8.41%
2.	Mar 31, 2020	$55.74		-5.62%	2,584.59	-12.51%
3.	Apr 30, 2020	$60.81	$0.45	9.90%	2,912.43	12.68%
.	.	.	.	.	.	.
.	.	.	.	.	.	.
.	.	.	.	.	.	.
58.	Nov 30, 2024	$59.22		6.19%	6,032.38	5.73%
59.	Dec 31, 2024	$56.56		-4.49%	5,881.63	-2.50%
Average (R):				0.30%		1.16%
Standard deviation:				6.33%		5.28%

		Bristol-Myers Squibb Co. (BMY)			Standard & Poor’s 500 (S&P 500)
t	Date	Price_BMY,t¹	Dividend_BMY,t¹	R_BMY,t²	Price_{S&P 500,t}	R_{S&P 500,t}³
	Jan 31, 2020	$62.95			3,225.52
1.	Feb 29, 2020	$59.06		-6.18%	2,954.22	-8.41%
2.	Mar 31, 2020	$55.74		-5.62%	2,584.59	-12.51%
3.	Apr 30, 2020	$60.81	$0.45	9.90%	2,912.43	12.68%
4.	May 31, 2020	$59.72		-1.79%	3,044.31	4.53%
5.	Jun 30, 2020	$58.80		-1.54%	3,100.29	1.84%
6.	Jul 31, 2020	$58.66	$0.45	0.53%	3,271.12	5.51%
7.	Aug 31, 2020	$62.20		6.03%	3,500.31	7.01%
8.	Sep 30, 2020	$60.29		-3.07%	3,363.00	-3.92%
9.	Oct 31, 2020	$58.45	$0.45	-2.31%	3,269.96	-2.77%
10.	Nov 30, 2020	$62.40		6.76%	3,621.63	10.75%
11.	Dec 31, 2020	$62.03	$0.49	0.19%	3,756.07	3.71%
12.	Jan 31, 2021	$61.43		-0.97%	3,714.24	-1.11%
13.	Feb 28, 2021	$61.33		-0.16%	3,811.15	2.61%
14.	Mar 31, 2021	$63.13	$0.49	3.73%	3,972.89	4.24%
15.	Apr 30, 2021	$62.42		-1.12%	4,181.17	5.24%
16.	May 31, 2021	$65.72		5.29%	4,204.11	0.55%
17.	Jun 30, 2021	$66.82		1.67%	4,297.50	2.22%
18.	Jul 31, 2021	$67.87	$0.49	2.30%	4,395.26	2.27%
19.	Aug 31, 2021	$66.86		-1.49%	4,522.68	2.90%
20.	Sep 30, 2021	$59.17	$0.49	-10.77%	4,307.54	-4.76%
21.	Oct 31, 2021	$58.40		-1.30%	4,605.38	6.91%
22.	Nov 30, 2021	$53.63		-8.17%	4,567.00	-0.83%
23.	Dec 31, 2021	$62.35		16.26%	4,766.18	4.36%
24.	Jan 31, 2022	$64.89	$0.54	4.94%	4,515.55	-5.26%
25.	Feb 28, 2022	$68.67		5.83%	4,373.94	-3.14%
26.	Mar 31, 2022	$73.03	$0.54	7.14%	4,530.41	3.58%
27.	Apr 30, 2022	$75.27		3.07%	4,131.93	-8.80%
28.	May 31, 2022	$75.45		0.24%	4,132.15	0.01%
29.	Jun 30, 2022	$77.00	$0.54	2.77%	3,785.38	-8.39%
30.	Jul 31, 2022	$73.78		-4.18%	4,130.29	9.11%
31.	Aug 31, 2022	$67.41		-8.63%	3,955.00	-4.24%
32.	Sep 30, 2022	$71.09		5.46%	3,585.62	-9.34%
33.	Oct 31, 2022	$77.47	$0.54	9.73%	3,871.98	7.99%
34.	Nov 30, 2022	$80.28		3.63%	4,080.11	5.38%
35.	Dec 31, 2022	$71.95		-10.38%	3,839.50	-5.90%
36.	Jan 31, 2023	$72.65	$0.57	1.77%	4,076.60	6.18%
37.	Feb 28, 2023	$68.96		-5.08%	3,970.15	-2.61%
38.	Mar 31, 2023	$69.31		0.51%	4,109.31	3.51%
39.	Apr 30, 2023	$66.77	$0.57	-2.84%	4,169.48	1.46%
40.	May 31, 2023	$64.44		-3.49%	4,179.83	0.25%
41.	Jun 30, 2023	$63.95		-0.76%	4,376.86	4.71%
42.	Jul 31, 2023	$62.19	$0.57	-1.86%	4,588.96	4.85%
43.	Aug 31, 2023	$61.65		-0.87%	4,507.66	-1.77%
44.	Sep 30, 2023	$58.04		-5.86%	4,288.05	-4.87%
45.	Oct 31, 2023	$51.53	$0.57	-10.23%	4,193.80	-2.20%
46.	Nov 30, 2023	$49.38		-4.17%	4,567.80	8.92%
47.	Dec 31, 2023	$51.31		3.91%	4,769.83	4.42%
48.	Jan 31, 2024	$48.87	$0.60	-3.59%	4,845.65	1.59%
49.	Feb 29, 2024	$50.75		3.85%	5,096.27	5.17%
50.	Mar 31, 2024	$54.23		6.86%	5,254.35	3.10%
51.	Apr 30, 2024	$43.94	$0.60	-17.87%	5,035.69	-4.16%
52.	May 31, 2024	$41.09		-6.49%	5,277.51	4.80%
53.	Jun 30, 2024	$41.53		1.07%	5,460.48	3.47%
54.	Jul 31, 2024	$47.56	$0.60	15.96%	5,522.30	1.13%
55.	Aug 31, 2024	$49.95		5.03%	5,648.40	2.28%
56.	Sep 30, 2024	$51.74		3.58%	5,762.48	2.02%
57.	Oct 31, 2024	$55.77	$0.60	8.95%	5,705.45	-0.99%
58.	Nov 30, 2024	$59.22		6.19%	6,032.38	5.73%
59.	Dec 31, 2024	$56.56		-4.49%	5,881.63	-2.50%
Average (R):				0.30%		1.16%
Standard deviation:				6.33%		5.28%

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 BMY during period t

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

Variance and Covariance

Bristol-Myers Squibb Co., calculation of variance and covariance of returns

t	Date	R_BMY,t	R_{S&P 500,t}	(R_BMY,t–R_BMY)²	(R_{S&P 500,t}–R_{S&P 500})²	(R_BMY,t–R_BMY)×(R_{S&P 500,t}–R_{S&P 500})
1.	Feb 29, 2020	-6.18%	-8.41%	42.02	91.63	62.05
2.	Mar 31, 2020	-5.62%	-12.51%	35.09	186.96	81.00
3.	Apr 30, 2020	9.90%	12.68%	92.17	132.78	110.63
.	.	.	.	.	.	.
.	.	.	.	.	.	.
.	.	.	.	.	.	.
58.	Nov 30, 2024	6.19%	5.73%	34.61	20.87	26.88
59.	Dec 31, 2024	-4.49%	-2.50%	22.99	13.40	17.55
Total (Σ):				2,326.76	1,618.62	726.32

t	Date	R_BMY,t	R_{S&P 500,t}	(R_BMY,t–R_BMY)²	(R_{S&P 500,t}–R_{S&P 500})²	(R_BMY,t–R_BMY)×(R_{S&P 500,t}–R_{S&P 500})
1.	Feb 29, 2020	-6.18%	-8.41%	42.02	91.63	62.05
2.	Mar 31, 2020	-5.62%	-12.51%	35.09	186.96	81.00
3.	Apr 30, 2020	9.90%	12.68%	92.17	132.78	110.63
4.	May 31, 2020	-1.79%	4.53%	4.39	11.34	-7.05
5.	Jun 30, 2020	-1.54%	1.84%	3.40	0.46	-1.25
6.	Jul 31, 2020	0.53%	5.51%	0.05	18.91	0.98
7.	Aug 31, 2020	6.03%	7.01%	32.86	34.17	33.51
8.	Sep 30, 2020	-3.07%	-3.92%	11.38	25.85	17.15
9.	Oct 31, 2020	-2.31%	-2.77%	6.80	15.43	10.24
10.	Nov 30, 2020	6.76%	10.75%	41.67	92.03	61.93
11.	Dec 31, 2020	0.19%	3.71%	0.01	6.51	-0.28
12.	Jan 31, 2021	-0.97%	-1.11%	1.61	5.18	2.89
13.	Feb 28, 2021	-0.16%	2.61%	0.22	2.10	-0.67
14.	Mar 31, 2021	3.73%	4.24%	11.77	9.50	10.58
15.	Apr 30, 2021	-1.12%	5.24%	2.04	16.66	-5.83
16.	May 31, 2021	5.29%	0.55%	24.84	0.38	-3.05
17.	Jun 30, 2021	1.67%	2.22%	1.88	1.12	1.45
18.	Jul 31, 2021	2.30%	2.27%	4.01	1.24	2.23
19.	Aug 31, 2021	-1.49%	2.90%	3.21	3.02	-3.11
20.	Sep 30, 2021	-10.77%	-4.76%	122.58	35.02	65.52
21.	Oct 31, 2021	-1.30%	6.91%	2.57	33.10	-9.23
22.	Nov 30, 2021	-8.17%	-0.83%	71.75	3.98	16.90
23.	Dec 31, 2021	16.26%	4.36%	254.62	10.24	51.06
24.	Jan 31, 2022	4.94%	-5.26%	21.50	41.21	-29.77
25.	Feb 28, 2022	5.83%	-3.14%	30.50	18.47	-23.73
26.	Mar 31, 2022	7.14%	3.58%	46.69	5.84	16.51
27.	Apr 30, 2022	3.07%	-8.80%	7.64	99.14	-27.53
28.	May 31, 2022	0.24%	0.01%	0.00	1.34	0.07
29.	Jun 30, 2022	2.77%	-8.39%	6.09	91.26	-23.57
30.	Jul 31, 2022	-4.18%	9.11%	20.11	63.21	-35.65
31.	Aug 31, 2022	-8.63%	-4.24%	79.86	29.22	48.30
32.	Sep 30, 2022	5.46%	-9.34%	26.59	110.27	-54.15
33.	Oct 31, 2022	9.73%	7.99%	88.95	46.58	64.37
34.	Nov 30, 2022	3.63%	5.38%	11.05	17.76	14.01
35.	Dec 31, 2022	-10.38%	-5.90%	114.04	49.82	75.38
36.	Jan 31, 2023	1.77%	6.18%	2.14	25.14	7.33
37.	Feb 28, 2023	-5.08%	-2.61%	28.96	14.23	20.30
38.	Mar 31, 2023	0.51%	3.51%	0.04	5.49	0.48
39.	Apr 30, 2023	-2.84%	1.46%	9.89	0.09	-0.95
40.	May 31, 2023	-3.49%	0.25%	14.38	0.83	3.46
41.	Jun 30, 2023	-0.76%	4.71%	1.13	12.62	-3.78
42.	Jul 31, 2023	-1.86%	4.85%	4.68	13.58	-7.97
43.	Aug 31, 2023	-0.87%	-1.77%	1.37	8.60	3.43
44.	Sep 30, 2023	-5.86%	-4.87%	37.92	36.40	37.15
45.	Oct 31, 2023	-10.23%	-2.20%	111.03	11.28	35.40
46.	Nov 30, 2023	-4.17%	8.92%	20.03	60.17	-34.71
47.	Dec 31, 2023	3.91%	4.42%	13.00	10.64	11.76
48.	Jan 31, 2024	-3.59%	1.59%	15.12	0.18	-1.67
49.	Feb 29, 2024	3.85%	5.17%	12.56	16.09	14.22
50.	Mar 31, 2024	6.86%	3.10%	42.96	3.77	12.72
51.	Apr 30, 2024	-17.87%	-4.16%	330.19	28.33	96.72
52.	May 31, 2024	-6.49%	4.80%	46.09	13.26	-24.72
53.	Jun 30, 2024	1.07%	3.47%	0.59	5.32	1.77
54.	Jul 31, 2024	15.96%	1.13%	245.29	0.00	-0.46
55.	Aug 31, 2024	5.03%	2.28%	22.30	1.26	5.30
56.	Sep 30, 2024	3.58%	2.02%	10.76	0.74	2.82
57.	Oct 31, 2024	8.95%	-0.99%	74.75	4.63	-18.60
58.	Nov 30, 2024	6.19%	5.73%	34.61	20.87	26.88
59.	Dec 31, 2024	-4.49%	-2.50%	22.99	13.40	17.55
Total (Σ):				2,326.76	1,618.62	726.32

Show all

Variance_BMY = Σ(R_BMY,t–R_BMY)² ÷ (59 – 1)
= 2,326.76 ÷ (59 – 1)
= 40.12

Variance_{S&P 500} = Σ(R_{S&P 500,t}–R_{S&P 500})² ÷ (59 – 1)
= 1,618.62 ÷ (59 – 1)
= 27.91

Covariance_{BMY, S&P 500} = Σ(R_BMY,t–R_BMY)×(R_{S&P 500,t}–R_{S&P 500}) ÷ (59 – 1)
= 726.32 ÷ (59 – 1)
= 12.52

Systematic Risk (β) Estimation

Variance_BMY	40.12
Variance_{S&P 500}	27.91
Covariance_{BMY, S&P 500}	12.52
Correlation coefficient_{BMY, S&P 500}¹	0.37
β_BMY²	0.45
α_BMY³	-0.22%

Calculations

¹ Correlation coefficient_{BMY, S&P 500}
= Covariance_{BMY, S&P 500} ÷ (Standard deviation_BMY × Standard deviation_{S&P 500})
= 12.52 ÷ (6.33% × 5.28%)
= 0.37

² β_BMY
= Covariance_{BMY, S&P 500} ÷ Variance_{S&P 500}
= 12.52 ÷ 27.91
= 0.45

³ α_BMY
= Average_BMY – β_BMY × Average_{S&P 500}
= 0.30% – 0.45 × 1.16%
= -0.22%

Expected Rate of Return

Assumptions
Rate of return on LT Treasury Composite¹	R_F	4.95%
Expected rate of return on market portfolio²	E(R_M)	14.71%
Systematic risk (β) of Bristol-Myers Squibb Co. common stock	β_BMY	0.45

Expected rate of return on Bristol-Myers Squibb Co. common stock³	E(R_BMY)	9.33%

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(R_BMY) = R_F + β_BMY [E(R_M) – R_F]
= 4.95% + 0.45 [14.71% – 4.95%]
= 9.33%