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Microsoft Excel LibreOffice Calc

Honeywell International Inc. (NYSE:HON)


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 Honeywell International Inc.’s common stock.


Rates of Return

Honeywell International Inc., monthly rates of return

Microsoft Excel LibreOffice Calc
Honeywell International Inc. (HON) Standard & Poor’s 500 (S&P 500)
t Date PriceHON,t1 DividendHON,t1 RHON,t2 PriceS&P 500,t RS&P 500,t3
Jan 31, 2015
1. Feb 28, 2015
2. Mar 31, 2015
3. Apr 30, 2015
. . . . . . .
. . . . . . .
. . . . . . .
58. Nov 30, 2019
59. Dec 31, 2019
Average:
Standard deviation:
Honeywell International Inc. (HON) Standard & Poor’s 500 (S&P 500)
t Date PriceHON,t1 DividendHON,t1 RHON,t2 PriceS&P 500,t RS&P 500,t3
Jan 31, 2015
1. Feb 28, 2015
2. Mar 31, 2015
3. Apr 30, 2015
4. May 31, 2015
5. Jun 30, 2015
6. Jul 31, 2015
7. Aug 31, 2015
8. Sep 30, 2015
9. Oct 31, 2015
10. Nov 30, 2015
11. Dec 31, 2015
12. Jan 31, 2016
13. Feb 29, 2016
14. Mar 31, 2016
15. Apr 30, 2016
16. May 31, 2016
17. Jun 30, 2016
18. Jul 31, 2016
19. Aug 31, 2016
20. Sep 30, 2016
21. Oct 31, 2016
22. Nov 30, 2016
23. Dec 31, 2016
24. Jan 31, 2017
25. Feb 28, 2017
26. Mar 31, 2017
27. Apr 30, 2017
28. May 31, 2017
29. Jun 30, 2017
30. Jul 31, 2017
31. Aug 31, 2017
32. Sep 30, 2017
33. Oct 31, 2017
34. Nov 30, 2017
35. Dec 31, 2017
36. Jan 31, 2018
37. Feb 28, 2018
38. Mar 31, 2018
39. Apr 30, 2018
40. May 31, 2018
41. Jun 30, 2018
42. Jul 31, 2018
43. Aug 31, 2018
44. Sep 30, 2018
45. Oct 31, 2018
46. Nov 30, 2018
47. Dec 31, 2018
48. Jan 31, 2019
49. Feb 28, 2019
50. Mar 31, 2019
51. Apr 30, 2019
52. May 31, 2019
53. Jun 30, 2019
54. Jul 31, 2019
55. Aug 31, 2019
56. Sep 30, 2019
57. Oct 31, 2019
58. Nov 30, 2019
59. Dec 31, 2019
Average:
Standard deviation:

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 HON 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
VarianceHON
VarianceS&P 500
CovarianceHON, S&P 500
Correlation coefficientHON, S&P 5001
βHON2
αHON3

Calculations

1 Correlation coefficientHON, S&P 500
= CovarianceHON, S&P 500 ÷ (Standard deviationHON × Standard deviationS&P 500)
= ÷ ( × )

2 βHON
= CovarianceHON, S&P 500 ÷ VarianceS&P 500
= ÷

3 αHON
= AverageHON – βHON × AverageS&P 500
= ×


Expected Rate of Return

Microsoft Excel LibreOffice Calc
Assumptions
Rate of return on LT Treasury Composite1 RF
Expected rate of return on market portfolio2 E(RM)
Systematic risk (β) of Honeywell International Inc.’s common stock βHON
 
Expected rate of return on Honeywell International Inc.’s common stock3 E(RHON)

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(RHON) = RF + βHON [E(RM) – RF]
= + []
=