Stock Analysis on Net
Stock Analysis on Net
Microsoft Excel LibreOffice Calc

Colgate-Palmolive Co. (NYSE:CL)

Capital Asset Pricing Model (CAPM)

Intermediate level

Capital asset pricing model (CAPM) indicates what should be the expected or required rate of return on risky assets like Colgate-Palmolive Co.’s common stock.


Rates of Return

Colgate-Palmolive Co., monthly rates of return

Microsoft Excel LibreOffice Calc
Colgate-Palmolive Co. (CL) Standard & Poor’s 500 (S&P 500)
t Date PriceCL,t1 DividendCL,t1 RCL,t2 PriceS&P 500,t RS&P 500,t3
Jan 31, 2015 67.52 1,994.99
1. Feb 28, 2015 70.82 4.89% 2,104.50 5.49%
2. Mar 31, 2015 69.34 -2.09% 2,067.89 -1.74%
3. Apr 30, 2015 67.28 0.38 -2.42% 2,085.51 0.85%
. . . . . . .
. . . . . . .
. . . . . . .
58. Nov 30, 2019 67.82 -1.14% 3,140.98 3.40%
59. Dec 31, 2019 68.84 1.50% 3,230.78 2.86%
Average: 0.32% 0.88%
Standard deviation: 4.50% 3.45%
Colgate-Palmolive Co. (CL) Standard & Poor’s 500 (S&P 500)
t Date PriceCL,t1 DividendCL,t1 RCL,t2 PriceS&P 500,t RS&P 500,t3
Jan 31, 2015 67.52 1,994.99
1. Feb 28, 2015 70.82 4.89% 2,104.50 5.49%
2. Mar 31, 2015 69.34 -2.09% 2,067.89 -1.74%
3. Apr 30, 2015 67.28 0.38 -2.42% 2,085.51 0.85%
4. May 31, 2015 66.79 -0.73% 2,107.39 1.05%
5. Jun 30, 2015 65.41 -2.07% 2,063.11 -2.10%
6. Jul 31, 2015 68.02 0.38 4.57% 2,103.84 1.97%
7. Aug 31, 2015 62.81 -7.66% 1,972.18 -6.26%
8. Sep 30, 2015 63.46 1.03% 1,920.03 -2.64%
9. Oct 31, 2015 66.35 0.38 5.15% 2,079.36 8.30%
10. Nov 30, 2015 65.68 -1.01% 2,080.41 0.05%
11. Dec 31, 2015 66.62 1.43% 2,043.94 -1.75%
12. Jan 31, 2016 67.53 0.38 1.94% 1,940.24 -5.07%
13. Feb 29, 2016 65.64 -2.80% 1,932.23 -0.41%
14. Mar 31, 2016 70.65 7.63% 2,059.74 6.60%
15. Apr 30, 2016 70.92 0.39 0.93% 2,065.30 0.27%
16. May 31, 2016 70.41 -0.72% 2,096.95 1.53%
17. Jun 30, 2016 73.20 3.96% 2,098.86 0.09%
18. Jul 31, 2016 74.43 0.39 2.21% 2,173.60 3.56%
19. Aug 31, 2016 74.34 -0.12% 2,170.95 -0.12%
20. Sep 30, 2016 74.14 -0.27% 2,168.27 -0.12%
21. Oct 31, 2016 71.36 0.39 -3.22% 2,126.15 -1.94%
22. Nov 30, 2016 65.23 -8.59% 2,198.81 3.42%
23. Dec 31, 2016 65.44 0.32% 2,238.83 1.82%
24. Jan 31, 2017 64.58 0.39 -0.72% 2,278.87 1.79%
25. Feb 28, 2017 72.98 13.01% 2,363.64 3.72%
26. Mar 31, 2017 73.19 0.29% 2,362.72 -0.04%
27. Apr 30, 2017 72.04 0.40 -1.02% 2,384.20 0.91%
28. May 31, 2017 76.36 6.00% 2,411.80 1.16%
29. Jun 30, 2017 74.13 -2.92% 2,423.41 0.48%
30. Jul 31, 2017 72.20 0.40 -2.06% 2,470.30 1.93%
31. Aug 31, 2017 71.64 -0.78% 2,471.65 0.05%
32. Sep 30, 2017 72.85 1.69% 2,519.36 1.93%
33. Oct 31, 2017 70.45 0.40 -2.75% 2,575.26 2.22%
34. Nov 30, 2017 72.45 2.84% 2,647.58 2.81%
35. Dec 31, 2017 75.45 4.14% 2,673.61 0.98%
36. Jan 31, 2018 74.24 0.40 -1.07% 2,823.81 5.62%
37. Feb 28, 2018 68.97 -7.10% 2,713.83 -3.89%
38. Mar 31, 2018 71.68 3.93% 2,640.87 -2.69%
39. Apr 30, 2018 65.23 0.42 -8.41% 2,648.05 0.27%
40. May 31, 2018 63.09 -3.28% 2,705.27 2.16%
41. Jun 30, 2018 64.81 2.73% 2,718.37 0.48%
42. Jul 31, 2018 67.01 0.42 4.04% 2,816.29 3.60%
43. Aug 31, 2018 66.41 -0.90% 2,901.52 3.03%
44. Sep 30, 2018 66.95 0.81% 2,913.98 0.43%
45. Oct 31, 2018 59.55 0.42 -10.43% 2,711.74 -6.94%
46. Nov 30, 2018 63.52 6.67% 2,760.17 1.79%
47. Dec 31, 2018 59.52 -6.30% 2,506.85 -9.18%
48. Jan 31, 2019 64.68 0.42 9.38% 2,704.10 7.87%
49. Feb 28, 2019 65.87 1.84% 2,784.49 2.97%
50. Mar 31, 2019 68.54 4.05% 2,834.40 1.79%
51. Apr 30, 2019 72.79 0.43 6.83% 2,945.83 3.93%
52. May 31, 2019 69.62 -4.35% 2,752.06 -6.58%
53. Jun 30, 2019 71.67 2.94% 2,941.76 6.89%
54. Jul 31, 2019 71.74 0.43 0.70% 2,980.38 1.31%
55. Aug 31, 2019 74.15 3.36% 2,926.46 -1.81%
56. Sep 30, 2019 73.51 -0.86% 2,976.74 1.72%
57. Oct 31, 2019 68.60 0.43 -6.09% 3,037.56 2.04%
58. Nov 30, 2019 67.82 -1.14% 3,140.98 3.40%
59. Dec 31, 2019 68.84 1.50% 3,230.78 2.86%
Average: 0.32% 0.88%
Standard deviation: 4.50% 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 CL during period t

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


Systematic Risk (β) Estimation

Microsoft Excel LibreOffice Calc
VarianceCL 20.29
VarianceS&P 500 11.88
CovarianceCL, S&P 500 8.52
Correlation coefficientCL, S&P 5001 0.55
βCL2 0.72
αCL3 -0.31

Calculations

1 Correlation coefficientCL, S&P 500
= CovarianceCL, S&P 500 ÷ (Standard deviationCL × Standard deviationS&P 500)
= 8.52 ÷ (4.50 × 3.45)

2 βCL
= CovarianceCL, S&P 500 ÷ VarianceS&P 500
= 8.52 ÷ 11.88

3 αCL
= AverageCL – βCL × AverageS&P 500
= 0.320.72 × 0.88


Expected Rate of Return

Microsoft Excel LibreOffice Calc
Assumptions
Rate of return on LT Treasury Composite1 RF 1.38%
Expected rate of return on market portfolio2 E(RM) 12.45%
Systematic risk (β) of Colgate-Palmolive Co.’s common stock βCL 0.72
 
Expected rate of return on Colgate-Palmolive Co.’s common stock3 E(RCL) 9.32%

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(RCL) = RF + βCL [E(RM) – RF]
= 1.38% + 0.72 [12.45%1.38%]
= 9.32%