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

Johnson & Johnson (NYSE:JNJ)

Capital Asset Pricing Model (CAPM)

Intermediate level

Rates of Return

Johnson & Johnson, monthly rates of return

Microsoft Excel LibreOffice Calc
Johnson & Johnson (JNJ) Standard & Poor’s 500 (S&P 500)
t Date PriceJNJ,t1 DividendJNJ,t1 RJNJ,t2 PriceS&P 500,t RS&P 500,t3
Jan 31, 2016 $104.44 1,940.24
1. Feb 29, 2016 $105.21 $0.75 1.46% 1,932.23 -0.41%
2. Mar 31, 2016 $108.20 2.84% 2,059.74 6.60%
3. Apr 30, 2016 $112.08 3.59% 2,065.30 0.27%
. . . . . . .
. . . . . . .
. . . . . . .
58. Nov 30, 2020 $144.68 $1.01 6.26% 3,621.63 10.75%
59. Dec 31, 2020 $157.38 8.78% 3,756.07 3.71%
Average (R): 1.04% 1.22%
Standard deviation: 4.84% 4.36%
Johnson & Johnson (JNJ) Standard & Poor’s 500 (S&P 500)
t Date PriceJNJ,t1 DividendJNJ,t1 RJNJ,t2 PriceS&P 500,t RS&P 500,t3
Jan 31, 2016 $104.44 1,940.24
1. Feb 29, 2016 $105.21 $0.75 1.46% 1,932.23 -0.41%
2. Mar 31, 2016 $108.20 2.84% 2,059.74 6.60%
3. Apr 30, 2016 $112.08 3.59% 2,065.30 0.27%
4. May 31, 2016 $112.69 $0.80 1.26% 2,096.95 1.53%
5. Jun 30, 2016 $121.30 7.64% 2,098.86 0.09%
6. Jul 31, 2016 $125.23 3.24% 2,173.60 3.56%
7. Aug 31, 2016 $119.34 $0.80 -4.06% 2,170.95 -0.12%
8. Sep 30, 2016 $118.13 -1.01% 2,168.27 -0.12%
9. Oct 31, 2016 $115.99 -1.81% 2,126.15 -1.94%
10. Nov 30, 2016 $111.30 $0.80 -3.35% 2,198.81 3.42%
11. Dec 31, 2016 $115.21 3.51% 2,238.83 1.82%
12. Jan 31, 2017 $113.25 -1.70% 2,278.87 1.79%
13. Feb 28, 2017 $122.21 $0.80 8.62% 2,363.64 3.72%
14. Mar 31, 2017 $124.55 1.91% 2,362.72 -0.04%
15. Apr 30, 2017 $123.47 -0.87% 2,384.20 0.91%
16. May 31, 2017 $128.25 $0.84 4.55% 2,411.80 1.16%
17. Jun 30, 2017 $132.29 3.15% 2,423.41 0.48%
18. Jul 31, 2017 $132.72 0.33% 2,470.30 1.93%
19. Aug 31, 2017 $132.37 $0.84 0.37% 2,471.65 0.05%
20. Sep 30, 2017 $130.01 -1.78% 2,519.36 1.93%
21. Oct 31, 2017 $139.41 7.23% 2,575.26 2.22%
22. Nov 30, 2017 $139.33 $0.84 0.55% 2,647.58 2.81%
23. Dec 31, 2017 $139.72 0.28% 2,673.61 0.98%
24. Jan 31, 2018 $138.19 -1.10% 2,823.81 5.62%
25. Feb 28, 2018 $129.88 $0.84 -5.41% 2,713.83 -3.89%
26. Mar 31, 2018 $128.15 -1.33% 2,640.87 -2.69%
27. Apr 30, 2018 $126.49 -1.30% 2,648.05 0.27%
28. May 31, 2018 $119.62 $0.90 -4.72% 2,705.27 2.16%
29. Jun 30, 2018 $121.34 1.44% 2,718.37 0.48%
30. Jul 31, 2018 $132.52 9.21% 2,816.29 3.60%
31. Aug 31, 2018 $134.69 $0.90 2.32% 2,901.52 3.03%
32. Sep 30, 2018 $138.17 2.58% 2,913.98 0.43%
33. Oct 31, 2018 $139.99 1.32% 2,711.74 -6.94%
34. Nov 30, 2018 $146.90 $0.90 5.58% 2,760.17 1.79%
35. Dec 31, 2018 $129.05 -12.15% 2,506.85 -9.18%
36. Jan 31, 2019 $133.08 3.12% 2,704.10 7.87%
37. Feb 28, 2019 $136.64 $0.90 3.35% 2,784.49 2.97%
38. Mar 31, 2019 $139.79 2.31% 2,834.40 1.79%
39. Apr 30, 2019 $141.20 1.01% 2,945.83 3.93%
40. May 31, 2019 $131.15 $0.95 -6.44% 2,752.06 -6.58%
41. Jun 30, 2019 $139.28 6.20% 2,941.76 6.89%
42. Jul 31, 2019 $130.22 -6.50% 2,980.38 1.31%
43. Aug 31, 2019 $128.36 $0.95 -0.70% 2,926.46 -1.81%
44. Sep 30, 2019 $129.38 0.79% 2,976.74 1.72%
45. Oct 31, 2019 $132.04 2.06% 3,037.56 2.04%
46. Nov 30, 2019 $137.49 $0.95 4.85% 3,140.98 3.40%
47. Dec 31, 2019 $145.87 6.09% 3,230.78 2.86%
48. Jan 31, 2020 $148.87 2.06% 3,225.52 -0.16%
49. Feb 29, 2020 $134.48 $0.95 -9.03% 2,954.22 -8.41%
50. Mar 31, 2020 $131.13 -2.49% 2,584.59 -12.51%
51. Apr 30, 2020 $150.04 14.42% 2,912.43 12.68%
52. May 31, 2020 $148.75 $1.01 -0.19% 3,044.31 4.53%
53. Jun 30, 2020 $140.63 -5.46% 3,100.29 1.84%
54. Jul 31, 2020 $145.76 3.65% 3,271.12 5.51%
55. Aug 31, 2020 $153.41 $1.01 5.94% 3,500.31 7.01%
56. Sep 30, 2020 $148.88 -2.95% 3,363.00 -3.92%
57. Oct 31, 2020 $137.11 -7.91% 3,269.96 -2.77%
58. Nov 30, 2020 $144.68 $1.01 6.26% 3,621.63 10.75%
59. Dec 31, 2020 $157.38 8.78% 3,756.07 3.71%
Average (R): 1.04% 1.22%
Standard deviation: 4.84% 4.36%

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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 JNJ during period t

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


Variance and Covariance

Johnson & Johnson, calculation of variance and covariance of returns

Microsoft Excel LibreOffice Calc
t Date RJNJ,t RS&P 500,t (RJNJ,tRJNJ)2 (RS&P 500,tRS&P 500)2 (RJNJ,tRJNJ)×(RS&P 500,tRS&P 500)
1. Feb 29, 2016 1.46% -0.41% 0.17 2.67 -0.67
2. Mar 31, 2016 2.84% 6.60% 3.23 28.93 9.67
3. Apr 30, 2016 3.59% 0.27% 6.46 0.90 -2.42
. . . . . . .
. . . . . . .
. . . . . . .
58. Nov 30, 2020 6.26% 10.75% 27.19 90.91 49.71
59. Dec 31, 2020 8.78% 3.71% 59.82 6.21 19.27
Total (Σ): 1,358.96 1,103.45 803.34
t Date RJNJ,t RS&P 500,t (RJNJ,tRJNJ)2 (RS&P 500,tRS&P 500)2 (RJNJ,tRJNJ)×(RS&P 500,tRS&P 500)
1. Feb 29, 2016 1.46% -0.41% 0.17 2.67 -0.67
2. Mar 31, 2016 2.84% 6.60% 3.23 28.93 9.67
3. Apr 30, 2016 3.59% 0.27% 6.46 0.90 -2.42
4. May 31, 2016 1.26% 1.53% 0.05 0.10 0.07
5. Jun 30, 2016 7.64% 0.09% 43.52 1.27 -7.45
6. Jul 31, 2016 3.24% 3.56% 4.82 5.48 5.14
7. Aug 31, 2016 -4.06% -0.12% 26.09 1.80 6.86
8. Sep 30, 2016 -1.01% -0.12% 4.23 1.81 2.76
9. Oct 31, 2016 -1.81% -1.94% 8.15 10.00 9.03
10. Nov 30, 2016 -3.35% 3.42% 19.34 4.83 -9.66
11. Dec 31, 2016 3.51% 1.82% 6.10 0.36 1.48
12. Jan 31, 2017 -1.70% 1.79% 7.54 0.32 -1.56
13. Feb 28, 2017 8.62% 3.72% 57.37 6.25 18.93
14. Mar 31, 2017 1.91% -0.04% 0.76 1.59 -1.10
15. Apr 30, 2017 -0.87% 0.91% 3.65 0.10 0.59
16. May 31, 2017 4.55% 1.16% 12.31 0.00 -0.22
17. Jun 30, 2017 3.15% 0.48% 4.44 0.55 -1.56
18. Jul 31, 2017 0.33% 1.93% 0.52 0.51 -0.51
19. Aug 31, 2017 0.37% 0.05% 0.46 1.36 0.79
20. Sep 30, 2017 -1.78% 1.93% 7.99 0.50 -2.01
21. Oct 31, 2017 7.23% 2.22% 38.27 1.00 6.18
22. Nov 30, 2017 0.55% 2.81% 0.25 2.52 -0.79
23. Dec 31, 2017 0.28% 0.98% 0.58 0.06 0.18
24. Jan 31, 2018 -1.10% 5.62% 4.57 19.34 -9.41
25. Feb 28, 2018 -5.41% -3.89% 41.59 26.16 32.99
26. Mar 31, 2018 -1.33% -2.69% 5.64 15.28 9.29
27. Apr 30, 2018 -1.30% 0.27% 5.47 0.90 2.22
28. May 31, 2018 -4.72% 2.16% 33.22 0.89 -5.42
29. Jun 30, 2018 1.44% 0.48% 0.16 0.54 -0.29
30. Jul 31, 2018 9.21% 3.60% 66.75 5.67 19.46
31. Aug 31, 2018 2.32% 3.03% 1.62 3.26 2.30
32. Sep 30, 2018 2.58% 0.43% 2.37 0.63 -1.22
33. Oct 31, 2018 1.32% -6.94% 0.07 66.59 -2.23
34. Nov 30, 2018 5.58% 1.79% 20.57 0.32 2.57
35. Dec 31, 2018 -12.15% -9.18% 174.11 108.11 137.20
36. Jan 31, 2019 3.12% 7.87% 4.32 44.20 13.82
37. Feb 28, 2019 3.35% 2.97% 5.32 3.07 4.04
38. Mar 31, 2019 2.31% 1.79% 1.59 0.33 0.72
39. Apr 30, 2019 1.01% 3.93% 0.00 7.35 -0.10
40. May 31, 2019 -6.44% -6.58% 56.08 60.81 58.39
41. Jun 30, 2019 6.20% 6.89% 26.58 32.18 29.25
42. Jul 31, 2019 -6.50% 1.31% 56.98 0.01 -0.70
43. Aug 31, 2019 -0.70% -1.81% 3.04 9.18 5.28
44. Sep 30, 2019 0.79% 1.72% 0.06 0.25 -0.12
45. Oct 31, 2019 2.06% 2.04% 1.02 0.68 0.83
46. Nov 30, 2019 4.85% 3.40% 14.46 4.77 8.31
47. Dec 31, 2019 6.09% 2.86% 25.51 2.69 8.28
48. Jan 31, 2020 2.06% -0.16% 1.03 1.91 -1.40
49. Feb 29, 2020 -9.03% -8.41% 101.44 92.76 97.00
50. Mar 31, 2020 -2.49% -12.51% 12.50 188.57 48.54
51. Apr 30, 2020 14.42% 12.68% 178.94 131.43 153.36
52. May 31, 2020 -0.19% 4.53% 1.51 10.94 -4.07
53. Jun 30, 2020 -5.46% 1.84% 42.28 0.38 -4.02
54. Jul 31, 2020 3.65% 5.51% 6.78 18.40 11.17
55. Aug 31, 2020 5.94% 7.01% 23.99 33.48 28.34
56. Sep 30, 2020 -2.95% -3.92% 15.97 26.45 20.55
57. Oct 31, 2020 -7.91% -2.77% 80.09 15.89 35.68
58. Nov 30, 2020 6.26% 10.75% 27.19 90.91 49.71
59. Dec 31, 2020 8.78% 3.71% 59.82 6.21 19.27
Total (Σ): 1,358.96 1,103.45 803.34

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VarianceJNJ = Σ(RJNJ,tRJNJ)2 ÷ (59 – 1)
= 1,358.96 ÷ (59 – 1)
= 23.43

VarianceS&P 500 = Σ(RS&P 500,tRS&P 500)2 ÷ (59 – 1)
= 1,103.45 ÷ (59 – 1)
= 19.02

CovarianceJNJ, S&P 500 = Σ(RJNJ,tRJNJ)×(RS&P 500,tRS&P 500) ÷ (59 – 1)
= 803.34 ÷ (59 – 1)
= 13.85


Systematic Risk (β) Estimation

Microsoft Excel LibreOffice Calc
VarianceJNJ 23.43
VarianceS&P 500 19.02
CovarianceJNJ, S&P 500 13.85
Correlation coefficientJNJ, S&P 5001 0.66
βJNJ2 0.73
αJNJ3 0.16%

Calculations

1 Correlation coefficientJNJ, S&P 500
= CovarianceJNJ, S&P 500 ÷ (Standard deviationJNJ × Standard deviationS&P 500)
= 13.85 ÷ (4.84% × 4.36%)
= 0.66

2 βJNJ
= CovarianceJNJ, S&P 500 ÷ VarianceS&P 500
= 13.85 ÷ 19.02
= 0.73

3 αJNJ
= AverageJNJ – βJNJ × AverageS&P 500
= 1.04%0.73 × 1.22%
= 0.16%


Expected Rate of Return

Microsoft Excel LibreOffice Calc
Assumptions
Rate of return on LT Treasury Composite1 RF 2.15%
Expected rate of return on market portfolio2 E(RM) 11.72%
Systematic risk (β) of Johnson & Johnson’s common stock βJNJ 0.73
 
Expected rate of return on Johnson & Johnson’s common stock3 E(RJNJ) 9.12%

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(RJNJ) = RF + βJNJ [E(RM) – RF]
= 2.15% + 0.73 [11.72%2.15%]
= 9.12%