Lockheed Martin Corp. (NYSE:LMT)

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 Lockheed Martin Corp. common stock.

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

Rates of Return

Lockheed Martin Corp., monthly rates of return

		Lockheed Martin Corp. (LMT)			Standard & Poor’s 500 (S&P 500)
t	Date	Price_LMT,t¹	Dividend_LMT,t¹	R_LMT,t²	Price_{S&P 500,t}	R_{S&P 500,t}³
	Jan 31, 2021	$321.82			3,714.24
1.	Feb 28, 2021	$330.25	$2.60	3.43%	3,811.15	2.61%
2.	Mar 31, 2021	$369.50		11.88%	3,972.89	4.24%
3.	Apr 30, 2021	$380.56		2.99%	4,181.17	5.24%
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58.	Nov 30, 2025	$457.86		-6.92%	6,849.09	0.13%
59.	Dec 31, 2025	$483.67	$3.45	6.39%	6,845.50	-0.05%
Average (R):				1.12%		1.14%
Standard deviation:				6.41%		4.37%

		Lockheed Martin Corp. (LMT)			Standard & Poor’s 500 (S&P 500)
t	Date	Price_LMT,t¹	Dividend_LMT,t¹	R_LMT,t²	Price_{S&P 500,t}	R_{S&P 500,t}³
	Jan 31, 2021	$321.82			3,714.24
1.	Feb 28, 2021	$330.25	$2.60	3.43%	3,811.15	2.61%
2.	Mar 31, 2021	$369.50		11.88%	3,972.89	4.24%
3.	Apr 30, 2021	$380.56		2.99%	4,181.17	5.24%
4.	May 31, 2021	$382.20	$2.60	1.11%	4,204.11	0.55%
5.	Jun 30, 2021	$378.35		-1.01%	4,297.50	2.22%
6.	Jul 31, 2021	$371.67		-1.77%	4,395.26	2.27%
7.	Aug 31, 2021	$359.80	$2.60	-2.49%	4,522.68	2.90%
8.	Sep 30, 2021	$345.10		-4.09%	4,307.54	-4.76%
9.	Oct 31, 2021	$332.32		-3.70%	4,605.38	6.91%
10.	Nov 30, 2021	$333.32	$2.80	1.14%	4,567.00	-0.83%
11.	Dec 31, 2021	$355.41		6.63%	4,766.18	4.36%
12.	Jan 31, 2022	$389.13		9.49%	4,515.55	-5.26%
13.	Feb 28, 2022	$433.80	$2.80	12.20%	4,373.94	-3.14%
14.	Mar 31, 2022	$441.40		1.75%	4,530.41	3.58%
15.	Apr 30, 2022	$432.12		-2.10%	4,131.93	-8.80%
16.	May 31, 2022	$440.11	$2.80	2.50%	4,132.15	0.01%
17.	Jun 30, 2022	$429.96		-2.31%	3,785.38	-8.39%
18.	Jul 31, 2022	$413.81		-3.76%	4,130.29	9.11%
19.	Aug 31, 2022	$420.11	$2.80	2.20%	3,955.00	-4.24%
20.	Sep 30, 2022	$386.29		-8.05%	3,585.62	-9.34%
21.	Oct 31, 2022	$486.68		25.99%	3,871.98	7.99%
22.	Nov 30, 2022	$485.19	$3.00	0.31%	4,080.11	5.38%
23.	Dec 31, 2022	$486.49		0.27%	3,839.50	-5.90%
24.	Jan 31, 2023	$463.26		-4.78%	4,076.60	6.18%
25.	Feb 28, 2023	$474.26	$3.00	3.02%	3,970.15	-2.61%
26.	Mar 31, 2023	$472.73		-0.32%	4,109.31	3.51%
27.	Apr 30, 2023	$464.45		-1.75%	4,169.48	1.46%
28.	May 31, 2023	$444.01	$3.00	-3.75%	4,179.83	0.25%
29.	Jun 30, 2023	$460.38		3.69%	4,376.86	4.71%
30.	Jul 31, 2023	$446.37		-3.04%	4,588.96	4.85%
31.	Aug 31, 2023	$448.35	$3.00	1.12%	4,507.66	-1.77%
32.	Sep 30, 2023	$408.96		-8.79%	4,288.05	-4.87%
33.	Oct 31, 2023	$454.64		11.17%	4,193.80	-2.20%
34.	Nov 30, 2023	$447.77	$3.15	-0.82%	4,567.80	8.92%
35.	Dec 31, 2023	$453.24		1.22%	4,769.83	4.42%
36.	Jan 31, 2024	$429.41		-5.26%	4,845.65	1.59%
37.	Feb 29, 2024	$428.24	$3.15	0.46%	5,096.27	5.17%
38.	Mar 31, 2024	$454.87		6.22%	5,254.35	3.10%
39.	Apr 30, 2024	$464.93		2.21%	5,035.69	-4.16%
40.	May 31, 2024	$470.34		1.16%	5,277.51	4.80%
41.	Jun 30, 2024	$467.10	$3.15	-0.02%	5,460.48	3.47%
42.	Jul 31, 2024	$541.92		16.02%	5,522.30	1.13%
43.	Aug 31, 2024	$568.10		4.83%	5,648.40	2.28%
44.	Sep 30, 2024	$584.56	$3.15	3.45%	5,762.48	2.02%
45.	Oct 31, 2024	$546.05		-6.59%	5,705.45	-0.99%
46.	Nov 30, 2024	$529.41		-3.05%	6,032.38	5.73%
47.	Dec 31, 2024	$485.94	$3.30	-7.59%	5,881.63	-2.50%
48.	Jan 31, 2025	$462.95		-4.73%	6,040.53	2.70%
49.	Feb 28, 2025	$450.37		-2.72%	5,954.50	-1.42%
50.	Mar 31, 2025	$446.71	$3.30	-0.08%	5,611.85	-5.75%
51.	Apr 30, 2025	$477.75		6.95%	5,569.06	-0.76%
52.	May 31, 2025	$482.38		0.97%	5,911.69	6.15%
53.	Jun 30, 2025	$463.14	$3.30	-3.30%	6,204.95	4.96%
54.	Jul 31, 2025	$420.98		-9.10%	6,339.39	2.17%
55.	Aug 31, 2025	$455.63		8.23%	6,460.26	1.91%
56.	Sep 30, 2025	$499.21	$3.30	10.29%	6,688.46	3.53%
57.	Oct 31, 2025	$491.88		-1.47%	6,840.20	2.27%
58.	Nov 30, 2025	$457.86		-6.92%	6,849.09	0.13%
59.	Dec 31, 2025	$483.67	$3.45	6.39%	6,845.50	-0.05%
Average (R):				1.12%		1.14%
Standard deviation:				6.41%		4.37%

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 LMT during period t

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

Variance and Covariance

Lockheed Martin Corp., calculation of variance and covariance of returns

t	Date	R_LMT,t	R_{S&P 500,t}	(R_LMT,t–R_LMT)²	(R_{S&P 500,t}–R_{S&P 500})²	(R_LMT,t–R_LMT)×(R_{S&P 500,t}–R_{S&P 500})
1.	Feb 28, 2021	3.43%	2.61%	5.33	2.17	3.40
2.	Mar 31, 2021	11.88%	4.24%	115.93	9.66	33.46
3.	Apr 30, 2021	2.99%	5.24%	3.52	16.86	7.70
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58.	Nov 30, 2025	-6.92%	0.13%	64.55	1.01	8.08
59.	Dec 31, 2025	6.39%	-0.05%	27.80	1.41	-6.27
Total (Σ):				2,382.15	1,108.23	236.67

t	Date	R_LMT,t	R_{S&P 500,t}	(R_LMT,t–R_LMT)²	(R_{S&P 500,t}–R_{S&P 500})²	(R_LMT,t–R_LMT)×(R_{S&P 500,t}–R_{S&P 500})
1.	Feb 28, 2021	3.43%	2.61%	5.33	2.17	3.40
2.	Mar 31, 2021	11.88%	4.24%	115.93	9.66	33.46
3.	Apr 30, 2021	2.99%	5.24%	3.52	16.86	7.70
4.	May 31, 2021	1.11%	0.55%	0.00	0.35	0.00
5.	Jun 30, 2021	-1.01%	2.22%	4.52	1.18	-2.31
6.	Jul 31, 2021	-1.77%	2.27%	8.31	1.30	-3.28
7.	Aug 31, 2021	-2.49%	2.90%	13.05	3.11	-6.37
8.	Sep 30, 2021	-4.09%	-4.76%	27.08	34.73	30.66
9.	Oct 31, 2021	-3.70%	6.91%	23.24	33.39	-27.86
10.	Nov 30, 2021	1.14%	-0.83%	0.00	3.88	-0.05
11.	Dec 31, 2021	6.63%	4.36%	30.35	10.40	17.77
12.	Jan 31, 2022	9.49%	-5.26%	70.05	40.89	-53.52
13.	Feb 28, 2022	12.20%	-3.14%	122.79	18.25	-47.34
14.	Mar 31, 2022	1.75%	3.58%	0.40	5.96	1.55
15.	Apr 30, 2022	-2.10%	-8.80%	10.37	98.64	31.98
16.	May 31, 2022	2.50%	0.01%	1.90	1.28	-1.56
17.	Jun 30, 2022	-2.31%	-8.39%	11.72	90.79	32.62
18.	Jul 31, 2022	-3.76%	9.11%	23.76	63.61	-38.87
19.	Aug 31, 2022	2.20%	-4.24%	1.17	28.95	-5.82
20.	Sep 30, 2022	-8.05%	-9.34%	84.05	109.74	96.04
21.	Oct 31, 2022	25.99%	7.99%	618.54	46.93	170.37
22.	Nov 30, 2022	0.31%	5.38%	0.65	17.97	-3.42
23.	Dec 31, 2022	0.27%	-5.90%	0.72	49.47	5.98
24.	Jan 31, 2023	-4.78%	6.18%	34.73	25.39	-29.69
25.	Feb 28, 2023	3.02%	-2.61%	3.63	14.04	-7.14
26.	Mar 31, 2023	-0.32%	3.51%	2.07	5.61	-3.41
27.	Apr 30, 2023	-1.75%	1.46%	8.23	0.11	-0.94
28.	May 31, 2023	-3.75%	0.25%	23.74	0.79	4.33
29.	Jun 30, 2023	3.69%	4.71%	6.60	12.80	9.19
30.	Jul 31, 2023	-3.04%	4.85%	17.31	13.76	-15.44
31.	Aug 31, 2023	1.12%	-1.77%	0.00	8.46	0.01
32.	Sep 30, 2023	-8.79%	-4.87%	98.08	36.10	59.50
33.	Oct 31, 2023	11.17%	-2.20%	101.04	11.12	-33.51
34.	Nov 30, 2023	-0.82%	8.92%	3.75	60.56	-15.07
35.	Dec 31, 2023	1.22%	4.42%	0.01	10.80	0.34
36.	Jan 31, 2024	-5.26%	1.59%	40.65	0.21	-2.89
37.	Feb 29, 2024	0.46%	5.17%	0.43	16.29	-2.65
38.	Mar 31, 2024	6.22%	3.10%	26.02	3.86	10.03
39.	Apr 30, 2024	2.21%	-4.16%	1.20	28.06	-5.79
40.	May 31, 2024	1.16%	4.80%	0.00	13.44	0.17
41.	Jun 30, 2024	-0.02%	3.47%	1.29	5.43	-2.65
42.	Jul 31, 2024	16.02%	1.13%	222.02	0.00	-0.06
43.	Aug 31, 2024	4.83%	2.28%	13.79	1.32	4.26
44.	Sep 30, 2024	3.45%	2.02%	5.45	0.78	2.06
45.	Oct 31, 2024	-6.59%	-0.99%	59.38	4.52	16.38
46.	Nov 30, 2024	-3.05%	5.73%	17.35	21.10	-19.13
47.	Dec 31, 2024	-7.59%	-2.50%	75.79	13.21	31.65
48.	Jan 31, 2025	-4.73%	2.70%	34.21	2.45	-9.16
49.	Feb 28, 2025	-2.72%	-1.42%	14.71	6.56	9.82
50.	Mar 31, 2025	-0.08%	-5.75%	1.43	47.48	8.25
51.	Apr 30, 2025	6.95%	-0.76%	34.00	3.60	-11.07
52.	May 31, 2025	0.97%	6.15%	0.02	25.16	-0.75
53.	Jun 30, 2025	-3.30%	4.96%	19.56	14.63	-16.91
54.	Jul 31, 2025	-9.10%	2.17%	104.47	1.06	-10.53
55.	Aug 31, 2025	8.23%	1.91%	50.59	0.59	5.48
56.	Sep 30, 2025	10.29%	3.53%	84.11	5.74	21.98
57.	Oct 31, 2025	-1.47%	2.27%	6.69	1.28	-2.93
58.	Nov 30, 2025	-6.92%	0.13%	64.55	1.01	8.08
59.	Dec 31, 2025	6.39%	-0.05%	27.80	1.41	-6.27
Total (Σ):				2,382.15	1,108.23	236.67

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Variance_LMT = Σ(R_LMT,t–R_LMT)² ÷ (59 – 1)
= 2,382.15 ÷ (59 – 1)
= 41.07

Variance_{S&P 500} = Σ(R_{S&P 500,t}–R_{S&P 500})² ÷ (59 – 1)
= 1,108.23 ÷ (59 – 1)
= 19.11

Covariance_{LMT, S&P 500} = Σ(R_LMT,t–R_LMT)×(R_{S&P 500,t}–R_{S&P 500}) ÷ (59 – 1)
= 236.67 ÷ (59 – 1)
= 4.08

Systematic Risk (β) Estimation

Variance_LMT	41.07
Variance_{S&P 500}	19.11
Covariance_{LMT, S&P 500}	4.08
Correlation coefficient_{LMT, S&P 500}¹	0.15
β_LMT²	0.21
α_LMT³	0.88%

Calculations

¹ Correlation coefficient_{LMT, S&P 500}
= Covariance_{LMT, S&P 500} ÷ (Standard deviation_LMT × Standard deviation_{S&P 500})
= 4.08 ÷ (6.41% × 4.37%)
= 0.15

² β_LMT
= Covariance_{LMT, S&P 500} ÷ Variance_{S&P 500}
= 4.08 ÷ 19.11
= 0.21

³ α_LMT
= Average_LMT – β_LMT × Average_{S&P 500}
= 1.12% – 0.21 × 1.14%
= 0.88%

Expected Rate of Return

Assumptions
Rate of return on LT Treasury Composite¹	R_F	4.79%
Expected rate of return on market portfolio²	E(R_M)	17.38%
Systematic risk (β) of Lockheed Martin Corp. common stock	β_LMT	0.21

Expected rate of return on Lockheed Martin Corp. common stock³	E(R_LMT)	7.48%

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_LMT) = R_F + β_LMT [E(R_M) – R_F]
= 4.79% + 0.21 [17.38% – 4.79%]
= 7.48%