Stock Analysis on Net

Ford Motor Co. (NYSE:F)

Capital Asset Pricing Model (CAPM)

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


Rates of Return

Ford Motor Co., monthly rates of return

Microsoft Excel LibreOffice Calc
Ford Motor Co. (F) Standard & Poor’s 500 (S&P 500)
t Date PriceF,t1 DividendF,t1 RF,t2 PriceS&P 500,t RS&P 500,t3
Jan 31, 2017 $12.36 2,278.87
1. Feb 28, 2017 $12.53 1.38% 2,363.64 3.72%
2. Mar 31, 2017 $11.64 -7.10% 2,362.72 -0.04%
3. Apr 30, 2017 $11.47 $0.15 -0.17% 2,384.20 0.91%
. . . . . . .
. . . . . . .
. . . . . . .
58. Nov 30, 2021 $19.19 $0.10 12.94% 4,567.00 -0.83%
59. Dec 31, 2021 $20.77 8.23% 4,766.18 4.36%
Average (R): 1.73% 1.36%
Standard deviation: 10.10% 4.48%
Ford Motor Co. (F) Standard & Poor’s 500 (S&P 500)
t Date PriceF,t1 DividendF,t1 RF,t2 PriceS&P 500,t RS&P 500,t3
Jan 31, 2017 $12.36 2,278.87
1. Feb 28, 2017 $12.53 1.38% 2,363.64 3.72%
2. Mar 31, 2017 $11.64 -7.10% 2,362.72 -0.04%
3. Apr 30, 2017 $11.47 $0.15 -0.17% 2,384.20 0.91%
4. May 31, 2017 $11.12 -3.05% 2,411.80 1.16%
5. Jun 30, 2017 $11.19 0.63% 2,423.41 0.48%
6. Jul 31, 2017 $11.22 $0.15 1.61% 2,470.30 1.93%
7. Aug 31, 2017 $11.03 -1.69% 2,471.65 0.05%
8. Sep 30, 2017 $11.97 8.52% 2,519.36 1.93%
9. Oct 31, 2017 $12.27 $0.15 3.76% 2,575.26 2.22%
10. Nov 30, 2017 $12.52 2.04% 2,647.58 2.81%
11. Dec 31, 2017 $12.49 -0.24% 2,673.61 0.98%
12. Jan 31, 2018 $10.97 $0.28 -9.93% 2,823.81 5.62%
13. Feb 28, 2018 $10.61 -3.28% 2,713.83 -3.89%
14. Mar 31, 2018 $11.08 4.43% 2,640.87 -2.69%
15. Apr 30, 2018 $11.24 $0.15 2.80% 2,648.05 0.27%
16. May 31, 2018 $11.55 2.76% 2,705.27 2.16%
17. Jun 30, 2018 $11.07 -4.16% 2,718.37 0.48%
18. Jul 31, 2018 $10.04 $0.15 -7.95% 2,816.29 3.60%
19. Aug 31, 2018 $9.48 -5.58% 2,901.52 3.03%
20. Sep 30, 2018 $9.25 -2.43% 2,913.98 0.43%
21. Oct 31, 2018 $9.55 $0.15 4.86% 2,711.74 -6.94%
22. Nov 30, 2018 $9.41 -1.47% 2,760.17 1.79%
23. Dec 31, 2018 $7.65 -18.70% 2,506.85 -9.18%
24. Jan 31, 2019 $8.80 $0.15 16.99% 2,704.10 7.87%
25. Feb 28, 2019 $8.77 -0.34% 2,784.49 2.97%
26. Mar 31, 2019 $8.78 0.11% 2,834.40 1.79%
27. Apr 30, 2019 $10.45 $0.15 20.73% 2,945.83 3.93%
28. May 31, 2019 $9.52 -8.90% 2,752.06 -6.58%
29. Jun 30, 2019 $10.23 7.46% 2,941.76 6.89%
30. Jul 31, 2019 $9.53 $0.15 -5.38% 2,980.38 1.31%
31. Aug 31, 2019 $9.17 -3.78% 2,926.46 -1.81%
32. Sep 30, 2019 $9.16 -0.11% 2,976.74 1.72%
33. Oct 31, 2019 $8.59 $0.15 -4.59% 3,037.56 2.04%
34. Nov 30, 2019 $9.06 5.47% 3,140.98 3.40%
35. Dec 31, 2019 $9.30 2.65% 3,230.78 2.86%
36. Jan 31, 2020 $8.82 $0.15 -3.55% 3,225.52 -0.16%
37. Feb 29, 2020 $6.96 -21.09% 2,954.22 -8.41%
38. Mar 31, 2020 $4.83 -30.60% 2,584.59 -12.51%
39. Apr 30, 2020 $5.09 5.38% 2,912.43 12.68%
40. May 31, 2020 $5.71 12.18% 3,044.31 4.53%
41. Jun 30, 2020 $6.08 6.48% 3,100.29 1.84%
42. Jul 31, 2020 $6.61 8.72% 3,271.12 5.51%
43. Aug 31, 2020 $6.82 3.18% 3,500.31 7.01%
44. Sep 30, 2020 $6.66 -2.35% 3,363.00 -3.92%
45. Oct 31, 2020 $7.73 16.07% 3,269.96 -2.77%
46. Nov 30, 2020 $9.08 17.46% 3,621.63 10.75%
47. Dec 31, 2020 $8.79 -3.19% 3,756.07 3.71%
48. Jan 31, 2021 $10.53 19.80% 3,714.24 -1.11%
49. Feb 28, 2021 $11.70 11.11% 3,811.15 2.61%
50. Mar 31, 2021 $12.25 4.70% 3,972.89 4.24%
51. Apr 30, 2021 $11.54 -5.80% 4,181.17 5.24%
52. May 31, 2021 $14.53 25.91% 4,204.11 0.55%
53. Jun 30, 2021 $14.86 2.27% 4,297.50 2.22%
54. Jul 31, 2021 $13.95 -6.12% 4,395.26 2.27%
55. Aug 31, 2021 $13.03 -6.59% 4,522.68 2.90%
56. Sep 30, 2021 $14.16 8.67% 4,307.54 -4.76%
57. Oct 31, 2021 $17.08 20.62% 4,605.38 6.91%
58. Nov 30, 2021 $19.19 $0.10 12.94% 4,567.00 -0.83%
59. Dec 31, 2021 $20.77 8.23% 4,766.18 4.36%
Average (R): 1.73% 1.36%
Standard deviation: 10.10% 4.48%

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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 F during period t

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


Variance and Covariance

Ford Motor Co., calculation of variance and covariance of returns

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t Date RF,t RS&P 500,t (RF,tRF)2 (RS&P 500,tRS&P 500)2 (RF,tRF)×(RS&P 500,tRS&P 500)
1. Feb 28, 2017 1.38% 3.72% 0.12 5.58 -0.83
2. Mar 31, 2017 -7.10% -0.04% 77.94 1.95 12.33
3. Apr 30, 2017 -0.17% 0.91% 3.60 0.20 0.85
. . . . . . .
. . . . . . .
. . . . . . .
58. Nov 30, 2021 12.94% -0.83% 125.75 4.80 -24.57
59. Dec 31, 2021 8.23% 4.36% 42.36 9.02 19.55
Total (Σ): 5,917.23 1,164.17 1,292.78
t Date RF,t RS&P 500,t (RF,tRF)2 (RS&P 500,tRS&P 500)2 (RF,tRF)×(RS&P 500,tRS&P 500)
1. Feb 28, 2017 1.38% 3.72% 0.12 5.58 -0.83
2. Mar 31, 2017 -7.10% -0.04% 77.94 1.95 12.33
3. Apr 30, 2017 -0.17% 0.91% 3.60 0.20 0.85
4. May 31, 2017 -3.05% 1.16% 22.82 0.04 0.96
5. Jun 30, 2017 0.63% 0.48% 1.20 0.77 0.96
6. Jul 31, 2017 1.61% 1.93% 0.01 0.33 -0.07
7. Aug 31, 2017 -1.69% 0.05% 11.69 1.70 4.46
8. Sep 30, 2017 8.52% 1.93% 46.20 0.33 3.89
9. Oct 31, 2017 3.76% 2.22% 4.14 0.74 1.75
10. Nov 30, 2017 2.04% 2.81% 0.10 2.10 0.45
11. Dec 31, 2017 -0.24% 0.98% 3.86 0.14 0.74
12. Jan 31, 2018 -9.93% 5.62% 135.80 18.15 -49.64
13. Feb 28, 2018 -3.28% -3.89% 25.07 27.59 26.30
14. Mar 31, 2018 4.43% -2.69% 7.31 16.37 -10.94
15. Apr 30, 2018 2.80% 0.27% 1.15 1.18 -1.16
16. May 31, 2018 2.76% 2.16% 1.07 0.64 0.83
17. Jun 30, 2018 -4.16% 0.48% 34.59 0.76 5.14
18. Jul 31, 2018 -7.95% 3.60% 93.60 5.04 -21.71
19. Aug 31, 2018 -5.58% 3.03% 53.33 2.78 -12.18
20. Sep 30, 2018 -2.43% 0.43% 17.23 0.86 3.85
21. Oct 31, 2018 4.86% -6.94% 9.86 68.86 -26.05
22. Nov 30, 2018 -1.47% 1.79% 10.18 0.18 -1.37
23. Dec 31, 2018 -18.70% -9.18% 417.33 111.00 215.23
24. Jan 31, 2019 16.99% 7.87% 233.12 42.39 99.40
25. Feb 28, 2019 -0.34% 2.97% 4.27 2.61 -3.34
26. Mar 31, 2019 0.11% 1.79% 2.60 0.19 -0.70
27. Apr 30, 2019 20.73% 3.93% 361.14 6.62 48.90
28. May 31, 2019 -8.90% -6.58% 112.89 62.97 84.31
29. Jun 30, 2019 7.46% 6.89% 32.86 30.64 31.73
30. Jul 31, 2019 -5.38% 1.31% 50.43 0.00 0.32
31. Aug 31, 2019 -3.78% -1.81% 30.28 10.03 17.43
32. Sep 30, 2019 -0.11% 1.72% 3.36 0.13 -0.66
33. Oct 31, 2019 -4.59% 2.04% 39.82 0.47 -4.32
34. Nov 30, 2019 5.47% 3.40% 14.03 4.19 7.67
35. Dec 31, 2019 2.65% 2.86% 0.85 2.25 1.39
36. Jan 31, 2020 -3.55% -0.16% 27.81 2.31 8.02
37. Feb 29, 2020 -21.09% -8.41% 520.46 95.43 222.87
38. Mar 31, 2020 -30.60% -12.51% 1,045.14 192.37 448.39
39. Apr 30, 2020 5.38% 12.68% 13.38 128.29 41.43
40. May 31, 2020 12.18% 4.53% 109.32 10.05 33.15
41. Jun 30, 2020 6.48% 1.84% 22.61 0.23 2.29
42. Jul 31, 2020 8.72% 5.51% 48.89 17.24 29.03
43. Aug 31, 2020 3.18% 7.01% 2.11 31.91 8.20
44. Sep 30, 2020 -2.35% -3.92% 16.58 27.89 21.50
45. Oct 31, 2020 16.07% -2.77% 205.66 17.01 -59.15
46. Nov 30, 2020 17.46% 10.75% 247.72 88.30 147.90
47. Dec 31, 2020 -3.19% 3.71% 24.20 5.54 -11.58
48. Jan 31, 2021 19.80% -1.11% 326.52 6.11 -44.66
49. Feb 28, 2021 11.11% 2.61% 88.09 1.57 11.74
50. Mar 31, 2021 4.70% 4.24% 8.85 8.33 8.59
51. Apr 30, 2021 -5.80% 5.24% 56.57 15.09 -29.22
52. May 31, 2021 25.91% 0.55% 584.90 0.65 -19.57
53. Jun 30, 2021 2.27% 2.22% 0.30 0.75 0.47
54. Jul 31, 2021 -6.12% 2.27% 61.61 0.84 -7.20
55. Aug 31, 2021 -6.59% 2.90% 69.23 2.38 -12.82
56. Sep 30, 2021 8.67% -4.76% 48.26 37.39 -42.48
57. Oct 31, 2021 20.62% 6.91% 357.07 30.87 105.00
58. Nov 30, 2021 12.94% -0.83% 125.75 4.80 -24.57
59. Dec 31, 2021 8.23% 4.36% 42.36 9.02 19.55
Total (Σ): 5,917.23 1,164.17 1,292.78

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VarianceF = Σ(RF,tRF)2 ÷ (59 – 1)
= 5,917.23 ÷ (59 – 1)
= 102.02

VarianceS&P 500 = Σ(RS&P 500,tRS&P 500)2 ÷ (59 – 1)
= 1,164.17 ÷ (59 – 1)
= 20.07

CovarianceF, S&P 500 = Σ(RF,tRF)×(RS&P 500,tRS&P 500) ÷ (59 – 1)
= 1,292.78 ÷ (59 – 1)
= 22.29


Systematic Risk (β) Estimation

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VarianceF 102.02
VarianceS&P 500 20.07
CovarianceF, S&P 500 22.29
Correlation coefficientF, S&P 5001 0.49
βF2 1.11
αF3 0.22%

Calculations

1 Correlation coefficientF, S&P 500
= CovarianceF, S&P 500 ÷ (Standard deviationF × Standard deviationS&P 500)
= 22.29 ÷ (10.10% × 4.48%)
= 0.49

2 βF
= CovarianceF, S&P 500 ÷ VarianceS&P 500
= 22.29 ÷ 20.07
= 1.11

3 αF
= AverageF – βF × AverageS&P 500
= 1.73%1.11 × 1.36%
= 0.22%


Expected Rate of Return

Microsoft Excel LibreOffice Calc
Assumptions
Rate of return on LT Treasury Composite1 RF 3.20%
Expected rate of return on market portfolio2 E(RM) 13.09%
Systematic risk (β) of Ford Motor Co. common stock βF 1.11
 
Expected rate of return on Ford Motor Co. common stock3 E(RF) 14.19%

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(RF) = RF + βF [E(RM) – RF]
= 3.20% + 1.11 [13.09%3.20%]
= 14.19%