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

Lowe’s Cos. Inc. (NYSE:LOW)

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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 Lowe’s Cos. Inc.’s common stock.

Rates of Return

Lowe’s Cos. Inc., monthly rates of return

Microsoft Excel LibreOffice Calc
Lowe’s Cos. Inc. (LOW) Standard & Poor’s 500 (S&P 500)
t Date PriceLOW,t1 DividendLOW,t1 RLOW,t2 PriceS&P 500,t RS&P 500,t3
Feb 28, 2014
1. Mar 31, 2014
2. Apr 30, 2014
3. May 31, 2014
. . . . . . .
. . . . . . .
. . . . . . .
70. Dec 31, 2019
71. Jan 31, 2020
Average (R):
Standard deviation:
Lowe’s Cos. Inc. (LOW) Standard & Poor’s 500 (S&P 500)
t Date PriceLOW,t1 DividendLOW,t1 RLOW,t2 PriceS&P 500,t RS&P 500,t3
Feb 28, 2014
1. Mar 31, 2014
2. Apr 30, 2014
3. May 31, 2014
4. Jun 30, 2014
5. Jul 31, 2014
6. Aug 31, 2014
7. Sep 30, 2014
8. Oct 31, 2014
9. Nov 30, 2014
10. Dec 31, 2014
11. Jan 31, 2015
12. Feb 28, 2015
13. Mar 31, 2015
14. Apr 30, 2015
15. May 31, 2015
16. Jun 30, 2015
17. Jul 31, 2015
18. Aug 31, 2015
19. Sep 30, 2015
20. Oct 31, 2015
21. Nov 30, 2015
22. Dec 31, 2015
23. Jan 31, 2016
24. Feb 29, 2016
25. Mar 31, 2016
26. Apr 30, 2016
27. May 31, 2016
28. Jun 30, 2016
29. Jul 31, 2016
30. Aug 31, 2016
31. Sep 30, 2016
32. Oct 31, 2016
33. Nov 30, 2016
34. Dec 31, 2016
35. Jan 31, 2017
36. Feb 28, 2017
37. Mar 31, 2017
38. Apr 30, 2017
39. May 31, 2017
40. Jun 30, 2017
41. Jul 31, 2017
42. Aug 31, 2017
43. Sep 30, 2017
44. Oct 31, 2017
45. Nov 30, 2017
46. Dec 31, 2017
47. Jan 31, 2018
48. Feb 28, 2018
49. Mar 31, 2018
50. Apr 30, 2018
51. May 31, 2018
52. Jun 30, 2018
53. Jul 31, 2018
54. Aug 31, 2018
55. Sep 30, 2018
56. Oct 31, 2018
57. Nov 30, 2018
58. Dec 31, 2018
59. Jan 31, 2019
60. Feb 28, 2019
61. Mar 31, 2019
62. Apr 30, 2019
63. May 31, 2019
64. Jun 30, 2019
65. Jul 31, 2019
66. Aug 31, 2019
67. Sep 30, 2019
68. Oct 31, 2019
69. Nov 30, 2019
70. Dec 31, 2019
71. Jan 31, 2020
Average (R):
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 LOW during period t

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

Variance and Covariance

Lowe’s Cos. Inc., calculation of variance and covariance of returns

Microsoft Excel LibreOffice Calc
t Date RLOW,t RS&P 500,t (RLOW,t–RLOW)2 (RS&P 500,t–RS&P 500)2 (RLOW,t–RLOW)×(RS&P 500,t–RS&P 500)
1. Mar 31, 2014
2. Apr 30, 2014
3. May 31, 2014
. . . . . . .
. . . . . . .
. . . . . . .
70. Dec 31, 2019
71. Jan 31, 2020
Total (Σ):
t Date RLOW,t RS&P 500,t (RLOW,t–RLOW)2 (RS&P 500,t–RS&P 500)2 (RLOW,t–RLOW)×(RS&P 500,t–RS&P 500)
1. Mar 31, 2014
2. Apr 30, 2014
3. May 31, 2014
4. Jun 30, 2014
5. Jul 31, 2014
6. Aug 31, 2014
7. Sep 30, 2014
8. Oct 31, 2014
9. Nov 30, 2014
10. Dec 31, 2014
11. Jan 31, 2015
12. Feb 28, 2015
13. Mar 31, 2015
14. Apr 30, 2015
15. May 31, 2015
16. Jun 30, 2015
17. Jul 31, 2015
18. Aug 31, 2015
19. Sep 30, 2015
20. Oct 31, 2015
21. Nov 30, 2015
22. Dec 31, 2015
23. Jan 31, 2016
24. Feb 29, 2016
25. Mar 31, 2016
26. Apr 30, 2016
27. May 31, 2016
28. Jun 30, 2016
29. Jul 31, 2016
30. Aug 31, 2016
31. Sep 30, 2016
32. Oct 31, 2016
33. Nov 30, 2016
34. Dec 31, 2016
35. Jan 31, 2017
36. Feb 28, 2017
37. Mar 31, 2017
38. Apr 30, 2017
39. May 31, 2017
40. Jun 30, 2017
41. Jul 31, 2017
42. Aug 31, 2017
43. Sep 30, 2017
44. Oct 31, 2017
45. Nov 30, 2017
46. Dec 31, 2017
47. Jan 31, 2018
48. Feb 28, 2018
49. Mar 31, 2018
50. Apr 30, 2018
51. May 31, 2018
52. Jun 30, 2018
53. Jul 31, 2018
54. Aug 31, 2018
55. Sep 30, 2018
56. Oct 31, 2018
57. Nov 30, 2018
58. Dec 31, 2018
59. Jan 31, 2019
60. Feb 28, 2019
61. Mar 31, 2019
62. Apr 30, 2019
63. May 31, 2019
64. Jun 30, 2019
65. Jul 31, 2019
66. Aug 31, 2019
67. Sep 30, 2019
68. Oct 31, 2019
69. Nov 30, 2019
70. Dec 31, 2019
71. Jan 31, 2020
Total (Σ):

Show all

VarianceLOW = Σ(RLOW,t–RLOW)2 ÷ (71 – 1)
= ÷ (71 – 1)
=

VarianceS&P 500 = Σ(RS&P 500,t–RS&P 500)2 ÷ (71 – 1)
= ÷ (71 – 1)
=

CovarianceLOW, S&P 500 = Σ(RLOW,t–RLOW)×(RS&P 500,t–RS&P 500) ÷ (71 – 1)
= ÷ (71 – 1)
=

Systematic Risk (β) Estimation

Microsoft Excel LibreOffice Calc
VarianceLOW
VarianceS&P 500
CovarianceLOW, S&P 500
Correlation coefficientLOW, S&P 5001
βLOW2
αLOW3

Calculations

1 Correlation coefficientLOW, S&P 500
= CovarianceLOW, S&P 500 ÷ (Standard deviationLOW × Standard deviationS&P 500)
= ÷ ( × )
=

2 βLOW
= CovarianceLOW, S&P 500 ÷ VarianceS&P 500
= ÷
=

3 αLOW
= AverageLOW – βLOW × 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 Lowe’s Cos. Inc.’s common stock βLOW
 
Expected rate of return on Lowe’s Cos. Inc.’s common stock3 E(RLOW)

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(RLOW) = RF + βLOW [E(RM) – RF]
= + [ – ]
=