Fair Isaac Corp. (NYSE:FICO)

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 Fair Isaac Corp. common stock.

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

Rates of Return

Fair Isaac Corp., monthly rates of return

		Fair Isaac Corp. (FICO)			Standard & Poor’s 500 (S&P 500)
t	Date	Price_FICO,t¹	Dividend_FICO,t¹	R_FICO,t²	Price_{S&P 500,t}	R_{S&P 500,t}³
	Oct 31, 2018	$192.71			2,711.74
1.	Nov 30, 2018	$198.63		3.07%	2,760.17	1.79%
2.	Dec 31, 2018	$187.00		-5.86%	2,506.85	-9.18%
3.	Jan 31, 2019	$225.20		20.43%	2,704.10	7.87%
.	.	.	.	.	.	.
.	.	.	.	.	.	.
.	.	.	.	.	.	.
70.	Aug 31, 2024	$1,730.27		8.14%	5,648.40	2.28%
71.	Sep 30, 2024	$1,943.52		12.32%	5,762.48	2.02%
Average (R):				3.81%		1.20%
Standard deviation:				10.25%		5.15%

		Fair Isaac Corp. (FICO)			Standard & Poor’s 500 (S&P 500)
t	Date	Price_FICO,t¹	Dividend_FICO,t¹	R_FICO,t²	Price_{S&P 500,t}	R_{S&P 500,t}³
	Oct 31, 2018	$192.71			2,711.74
1.	Nov 30, 2018	$198.63		3.07%	2,760.17	1.79%
2.	Dec 31, 2018	$187.00		-5.86%	2,506.85	-9.18%
3.	Jan 31, 2019	$225.20		20.43%	2,704.10	7.87%
4.	Feb 28, 2019	$247.82		10.04%	2,784.49	2.97%
5.	Mar 31, 2019	$271.63		9.61%	2,834.40	1.79%
6.	Apr 30, 2019	$279.75		2.99%	2,945.83	3.93%
7.	May 31, 2019	$295.90		5.77%	2,752.06	-6.58%
8.	Jun 30, 2019	$314.02		6.12%	2,941.76	6.89%
9.	Jul 31, 2019	$347.42		10.64%	2,980.38	1.31%
10.	Aug 31, 2019	$352.72		1.53%	2,926.46	-1.81%
11.	Sep 30, 2019	$303.52		-13.95%	2,976.74	1.72%
12.	Oct 31, 2019	$304.04		0.17%	3,037.56	2.04%
13.	Nov 30, 2019	$367.75		20.95%	3,140.98	3.40%
14.	Dec 31, 2019	$374.68		1.88%	3,230.78	2.86%
15.	Jan 31, 2020	$402.38		7.39%	3,225.52	-0.16%
16.	Feb 29, 2020	$376.03		-6.55%	2,954.22	-8.41%
17.	Mar 31, 2020	$307.69		-18.17%	2,584.59	-12.51%
18.	Apr 30, 2020	$352.94		14.71%	2,912.43	12.68%
19.	May 31, 2020	$402.65		14.08%	3,044.31	4.53%
20.	Jun 30, 2020	$418.04		3.82%	3,100.29	1.84%
21.	Jul 31, 2020	$439.19		5.06%	3,271.12	5.51%
22.	Aug 31, 2020	$420.79		-4.19%	3,500.31	7.01%
23.	Sep 30, 2020	$425.38		1.09%	3,363.00	-3.92%
24.	Oct 31, 2020	$391.45		-7.98%	3,269.96	-2.77%
25.	Nov 30, 2020	$472.78		20.78%	3,621.63	10.75%
26.	Dec 31, 2020	$511.04		8.09%	3,756.07	3.71%
27.	Jan 31, 2021	$450.11		-11.92%	3,714.24	-1.11%
28.	Feb 28, 2021	$457.55		1.65%	3,811.15	2.61%
29.	Mar 31, 2021	$486.05		6.23%	3,972.89	4.24%
30.	Apr 30, 2021	$521.41		7.27%	4,181.17	5.24%
31.	May 31, 2021	$506.06		-2.94%	4,204.11	0.55%
32.	Jun 30, 2021	$502.68		-0.67%	4,297.50	2.22%
33.	Jul 31, 2021	$523.91		4.22%	4,395.26	2.27%
34.	Aug 31, 2021	$459.74		-12.25%	4,522.68	2.90%
35.	Sep 30, 2021	$397.93		-13.44%	4,307.54	-4.76%
36.	Oct 31, 2021	$398.20		0.07%	4,605.38	6.91%
37.	Nov 30, 2021	$353.13		-11.32%	4,567.00	-0.83%
38.	Dec 31, 2021	$433.67		22.81%	4,766.18	4.36%
39.	Jan 31, 2022	$494.99		14.14%	4,515.55	-5.26%
40.	Feb 28, 2022	$471.19		-4.81%	4,373.94	-3.14%
41.	Mar 31, 2022	$466.46		-1.00%	4,530.41	3.58%
42.	Apr 30, 2022	$373.51		-19.93%	4,131.93	-8.80%
43.	May 31, 2022	$409.55		9.65%	4,132.15	0.01%
44.	Jun 30, 2022	$400.90		-2.11%	3,785.38	-8.39%
45.	Jul 31, 2022	$462.03		15.25%	4,130.29	9.11%
46.	Aug 31, 2022	$449.40		-2.73%	3,955.00	-4.24%
47.	Sep 30, 2022	$412.01		-8.32%	3,585.62	-9.34%
48.	Oct 31, 2022	$478.84		16.22%	3,871.98	7.99%
49.	Nov 30, 2022	$619.72		29.42%	4,080.11	5.38%
50.	Dec 31, 2022	$598.58		-3.41%	3,839.50	-5.90%
51.	Jan 31, 2023	$665.95		11.25%	4,076.60	6.18%
52.	Feb 28, 2023	$677.39		1.72%	3,970.15	-2.61%
53.	Mar 31, 2023	$702.69		3.73%	4,109.31	3.51%
54.	Apr 30, 2023	$727.95		3.59%	4,169.48	1.46%
55.	May 31, 2023	$787.67		8.20%	4,179.83	0.25%
56.	Jun 30, 2023	$809.21		2.73%	4,376.86	4.71%
57.	Jul 31, 2023	$837.97		3.55%	4,588.96	4.85%
58.	Aug 31, 2023	$904.59		7.95%	4,507.66	-1.77%
59.	Sep 30, 2023	$868.53		-3.99%	4,288.05	-4.87%
60.	Oct 31, 2023	$845.87		-2.61%	4,193.80	-2.20%
61.	Nov 30, 2023	$1,087.60		28.58%	4,567.80	8.92%
62.	Dec 31, 2023	$1,164.01		7.03%	4,769.83	4.42%
63.	Jan 31, 2024	$1,198.83		2.99%	4,845.65	1.59%
64.	Feb 29, 2024	$1,269.91		5.93%	5,096.27	5.17%
65.	Mar 31, 2024	$1,249.61		-1.60%	5,254.35	3.10%
66.	Apr 30, 2024	$1,133.33		-9.31%	5,035.69	-4.16%
67.	May 31, 2024	$1,289.93		13.82%	5,277.51	4.80%
68.	Jun 30, 2024	$1,488.66		15.41%	5,460.48	3.47%
69.	Jul 31, 2024	$1,600.00		7.48%	5,522.30	1.13%
70.	Aug 31, 2024	$1,730.27		8.14%	5,648.40	2.28%
71.	Sep 30, 2024	$1,943.52		12.32%	5,762.48	2.02%
Average (R):				3.81%		1.20%
Standard deviation:				10.25%		5.15%

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 FICO during period t

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

Variance and Covariance

Fair Isaac Corp., calculation of variance and covariance of returns

t	Date	R_FICO,t	R_{S&P 500,t}	(R_FICO,t–R_FICO)²	(R_{S&P 500,t}–R_{S&P 500})²	(R_FICO,t–R_FICO)×(R_{S&P 500,t}–R_{S&P 500})
1.	Nov 30, 2018	3.07%	1.79%	0.55	0.34	-0.43
2.	Dec 31, 2018	-5.86%	-9.18%	93.43	107.68	100.30
3.	Jan 31, 2019	20.43%	7.87%	276.13	44.48	110.83
.	.	.	.	.	.	.
.	.	.	.	.	.	.
.	.	.	.	.	.	.
70.	Aug 31, 2024	8.14%	2.28%	18.76	1.18	4.70
71.	Sep 30, 2024	12.32%	2.02%	72.49	0.67	6.99
Total (Σ):				7,360.28	1,855.59	2,377.51

t	Date	R_FICO,t	R_{S&P 500,t}	(R_FICO,t–R_FICO)²	(R_{S&P 500,t}–R_{S&P 500})²	(R_FICO,t–R_FICO)×(R_{S&P 500,t}–R_{S&P 500})
1.	Nov 30, 2018	3.07%	1.79%	0.55	0.34	-0.43
2.	Dec 31, 2018	-5.86%	-9.18%	93.43	107.68	100.30
3.	Jan 31, 2019	20.43%	7.87%	276.13	44.48	110.83
4.	Feb 28, 2019	10.04%	2.97%	38.86	3.15	11.06
5.	Mar 31, 2019	9.61%	1.79%	33.61	0.35	3.44
6.	Apr 30, 2019	2.99%	3.93%	0.67	7.47	-2.24
7.	May 31, 2019	5.77%	-6.58%	3.85	60.48	-15.26
8.	Jun 30, 2019	6.12%	6.89%	5.35	32.42	13.17
9.	Jul 31, 2019	10.64%	1.31%	46.59	0.01	0.78
10.	Aug 31, 2019	1.53%	-1.81%	5.22	9.05	6.87
11.	Sep 30, 2019	-13.95%	1.72%	315.40	0.27	-9.22
12.	Oct 31, 2019	0.17%	2.04%	13.24	0.71	-3.07
13.	Nov 30, 2019	20.95%	3.40%	293.91	4.87	37.81
14.	Dec 31, 2019	1.88%	2.86%	3.71	2.76	-3.20
15.	Jan 31, 2020	7.39%	-0.16%	12.83	1.85	-4.88
16.	Feb 29, 2020	-6.55%	-8.41%	107.31	92.35	99.55
17.	Mar 31, 2020	-18.17%	-12.51%	483.33	187.99	301.43
18.	Apr 30, 2020	14.71%	12.68%	118.72	131.91	125.14
19.	May 31, 2020	14.08%	4.53%	105.55	11.08	34.20
20.	Jun 30, 2020	3.82%	1.84%	0.00	0.41	0.01
21.	Jul 31, 2020	5.06%	5.51%	1.56	18.59	5.38
22.	Aug 31, 2020	-4.19%	7.01%	64.00	33.73	-46.46
23.	Sep 30, 2020	1.09%	-3.92%	7.40	26.23	13.93
24.	Oct 31, 2020	-7.98%	-2.77%	138.93	15.73	46.74
25.	Nov 30, 2020	20.78%	10.75%	287.84	91.31	162.12
26.	Dec 31, 2020	8.09%	3.71%	18.33	6.32	10.76
27.	Jan 31, 2021	-11.92%	-1.11%	247.54	5.35	36.39
28.	Feb 28, 2021	1.65%	2.61%	4.66	1.99	-3.04
29.	Mar 31, 2021	6.23%	4.24%	5.85	9.27	7.36
30.	Apr 30, 2021	7.27%	5.24%	12.00	16.35	14.01
31.	May 31, 2021	-2.94%	0.55%	45.62	0.42	4.39
32.	Jun 30, 2021	-0.67%	2.22%	20.06	1.05	-4.58
33.	Jul 31, 2021	4.22%	2.27%	0.17	1.16	0.44
34.	Aug 31, 2021	-12.25%	2.90%	257.89	2.89	-27.30
35.	Sep 30, 2021	-13.44%	-4.76%	297.74	35.47	102.77
36.	Oct 31, 2021	0.07%	6.91%	14.01	32.67	-21.39
37.	Nov 30, 2021	-11.32%	-0.83%	228.89	4.13	30.75
38.	Dec 31, 2021	22.81%	4.36%	360.88	10.00	60.07
39.	Jan 31, 2022	14.14%	-5.26%	106.69	41.70	-66.70
40.	Feb 28, 2022	-4.81%	-3.14%	74.28	18.79	37.36
41.	Mar 31, 2022	-1.00%	3.58%	23.18	5.66	-11.45
42.	Apr 30, 2022	-19.93%	-8.80%	563.46	99.89	237.25
43.	May 31, 2022	9.65%	0.01%	34.09	1.42	-6.97
44.	Jun 30, 2022	-2.11%	-8.39%	35.08	91.99	56.80
45.	Jul 31, 2022	15.25%	9.11%	130.82	62.61	90.50
46.	Aug 31, 2022	-2.73%	-4.24%	42.83	29.63	35.62
47.	Sep 30, 2022	-8.32%	-9.34%	147.15	111.06	127.84
48.	Oct 31, 2022	16.22%	7.99%	154.00	46.07	84.23
49.	Nov 30, 2022	29.42%	5.38%	655.90	17.44	106.96
50.	Dec 31, 2022	-3.41%	-5.90%	52.16	50.36	51.25
51.	Jan 31, 2023	11.25%	6.18%	55.42	24.76	37.05
52.	Feb 28, 2023	1.72%	-2.61%	4.38	14.52	7.97
53.	Mar 31, 2023	3.73%	3.51%	0.01	5.32	-0.17
54.	Apr 30, 2023	3.59%	1.46%	0.05	0.07	-0.06
55.	May 31, 2023	8.20%	0.25%	19.30	0.90	-4.18
56.	Jun 30, 2023	2.73%	4.71%	1.16	12.35	-3.78
57.	Jul 31, 2023	3.55%	4.85%	0.07	13.30	-0.94
58.	Aug 31, 2023	7.95%	-1.77%	17.14	8.82	-12.30
59.	Sep 30, 2023	-3.99%	-4.87%	60.79	36.86	47.33
60.	Oct 31, 2023	-2.61%	-2.20%	41.21	11.54	21.81
61.	Nov 30, 2023	28.58%	8.92%	613.41	59.58	191.18
62.	Dec 31, 2023	7.03%	4.42%	10.34	10.39	10.36
63.	Jan 31, 2024	2.99%	1.59%	0.67	0.15	-0.32
64.	Feb 29, 2024	5.93%	5.17%	4.49	15.79	8.42
65.	Mar 31, 2024	-1.60%	3.10%	29.26	3.62	-10.29
66.	Apr 30, 2024	-9.31%	-4.16%	172.03	28.73	70.31
67.	May 31, 2024	13.82%	4.80%	100.14	12.98	36.06
68.	Jun 30, 2024	15.41%	3.47%	134.46	5.14	26.30
69.	Jul 31, 2024	7.48%	1.13%	13.46	0.00	-0.25
70.	Aug 31, 2024	8.14%	2.28%	18.76	1.18	4.70
71.	Sep 30, 2024	12.32%	2.02%	72.49	0.67	6.99
Total (Σ):				7,360.28	1,855.59	2,377.51

Show all

Variance_FICO = Σ(R_FICO,t–R_FICO)² ÷ (71 – 1)
= 7,360.28 ÷ (71 – 1)
= 105.15

Variance_{S&P 500} = Σ(R_{S&P 500,t}–R_{S&P 500})² ÷ (71 – 1)
= 1,855.59 ÷ (71 – 1)
= 26.51

Covariance_{FICO, S&P 500} = Σ(R_FICO,t–R_FICO)×(R_{S&P 500,t}–R_{S&P 500}) ÷ (71 – 1)
= 2,377.51 ÷ (71 – 1)
= 33.96

Systematic Risk (β) Estimation

Variance_FICO	105.15
Variance_{S&P 500}	26.51
Covariance_{FICO, S&P 500}	33.96
Correlation coefficient_{FICO, S&P 500}¹	0.64
β_FICO²	1.28
α_FICO³	2.27%

Calculations

¹ Correlation coefficient_{FICO, S&P 500}
= Covariance_{FICO, S&P 500} ÷ (Standard deviation_FICO × Standard deviation_{S&P 500})
= 33.96 ÷ (10.25% × 5.15%)
= 0.64

² β_FICO
= Covariance_{FICO, S&P 500} ÷ Variance_{S&P 500}
= 33.96 ÷ 26.51
= 1.28

³ α_FICO
= Average_FICO – β_FICO × Average_{S&P 500}
= 3.81% – 1.28 × 1.20%
= 2.27%

Expected Rate of Return

Assumptions
Rate of return on LT Treasury Composite¹	R_F	4.71%
Expected rate of return on market portfolio²	E(R_M)	14.85%
Systematic risk (β) of Fair Isaac Corp. common stock	β_FICO	1.28

Expected rate of return on Fair Isaac Corp. common stock³	E(R_FICO)	17.71%

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_FICO) = R_F + β_FICO [E(R_M) – R_F]
= 4.71% + 1.28 [14.85% – 4.71%]
= 17.71%