Stock Analysis on Net

Nike Inc. (NYSE:NKE)

$19.99

Capital Asset Pricing Model (CAPM)

Microsoft Excel

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

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Rates of Return

Nike Inc., monthly rates of return

Microsoft Excel
Nike Inc. (NKE) Standard & Poor’s 500 (S&P 500)
t Date PriceNKE,t1 DividendNKE,t1 RNKE,t2 PriceS&P 500,t RS&P 500,t3
Jun 30, 2016
1. Jul 31, 2016
2. Aug 31, 2016
3. Sep 30, 2016
. . . . . . .
. . . . . . .
. . . . . . .
70. Apr 30, 2022
71. May 31, 2022
Average (R):
Standard deviation:
Nike Inc. (NKE) Standard & Poor’s 500 (S&P 500)
t Date PriceNKE,t1 DividendNKE,t1 RNKE,t2 PriceS&P 500,t RS&P 500,t3
Jun 30, 2016
1. Jul 31, 2016
2. Aug 31, 2016
3. Sep 30, 2016
4. Oct 31, 2016
5. Nov 30, 2016
6. Dec 31, 2016
7. Jan 31, 2017
8. Feb 28, 2017
9. Mar 31, 2017
10. Apr 30, 2017
11. May 31, 2017
12. Jun 30, 2017
13. Jul 31, 2017
14. Aug 31, 2017
15. Sep 30, 2017
16. Oct 31, 2017
17. Nov 30, 2017
18. Dec 31, 2017
19. Jan 31, 2018
20. Feb 28, 2018
21. Mar 31, 2018
22. Apr 30, 2018
23. May 31, 2018
24. Jun 30, 2018
25. Jul 31, 2018
26. Aug 31, 2018
27. Sep 30, 2018
28. Oct 31, 2018
29. Nov 30, 2018
30. Dec 31, 2018
31. Jan 31, 2019
32. Feb 28, 2019
33. Mar 31, 2019
34. Apr 30, 2019
35. May 31, 2019
36. Jun 30, 2019
37. Jul 31, 2019
38. Aug 31, 2019
39. Sep 30, 2019
40. Oct 31, 2019
41. Nov 30, 2019
42. Dec 31, 2019
43. Jan 31, 2020
44. Feb 29, 2020
45. Mar 31, 2020
46. Apr 30, 2020
47. May 31, 2020
48. Jun 30, 2020
49. Jul 31, 2020
50. Aug 31, 2020
51. Sep 30, 2020
52. Oct 31, 2020
53. Nov 30, 2020
54. Dec 31, 2020
55. Jan 31, 2021
56. Feb 28, 2021
57. Mar 31, 2021
58. Apr 30, 2021
59. May 31, 2021
60. Jun 30, 2021
61. Jul 31, 2021
62. Aug 31, 2021
63. Sep 30, 2021
64. Oct 31, 2021
65. Nov 30, 2021
66. Dec 31, 2021
67. Jan 31, 2022
68. Feb 28, 2022
69. Mar 31, 2022
70. Apr 30, 2022
71. May 31, 2022
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 NKE during period t

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


Variance and Covariance

Nike Inc., calculation of variance and covariance of returns

Microsoft Excel
t Date RNKE,t RS&P 500,t (RNKE,tRNKE)2 (RS&P 500,tRS&P 500)2 (RNKE,tRNKE)×(RS&P 500,tRS&P 500)
1. Jul 31, 2016
2. Aug 31, 2016
3. Sep 30, 2016
. . . . . . .
. . . . . . .
. . . . . . .
70. Apr 30, 2022
71. May 31, 2022
Total (Σ):
t Date RNKE,t RS&P 500,t (RNKE,tRNKE)2 (RS&P 500,tRS&P 500)2 (RNKE,tRNKE)×(RS&P 500,tRS&P 500)
1. Jul 31, 2016
2. Aug 31, 2016
3. Sep 30, 2016
4. Oct 31, 2016
5. Nov 30, 2016
6. Dec 31, 2016
7. Jan 31, 2017
8. Feb 28, 2017
9. Mar 31, 2017
10. Apr 30, 2017
11. May 31, 2017
12. Jun 30, 2017
13. Jul 31, 2017
14. Aug 31, 2017
15. Sep 30, 2017
16. Oct 31, 2017
17. Nov 30, 2017
18. Dec 31, 2017
19. Jan 31, 2018
20. Feb 28, 2018
21. Mar 31, 2018
22. Apr 30, 2018
23. May 31, 2018
24. Jun 30, 2018
25. Jul 31, 2018
26. Aug 31, 2018
27. Sep 30, 2018
28. Oct 31, 2018
29. Nov 30, 2018
30. Dec 31, 2018
31. Jan 31, 2019
32. Feb 28, 2019
33. Mar 31, 2019
34. Apr 30, 2019
35. May 31, 2019
36. Jun 30, 2019
37. Jul 31, 2019
38. Aug 31, 2019
39. Sep 30, 2019
40. Oct 31, 2019
41. Nov 30, 2019
42. Dec 31, 2019
43. Jan 31, 2020
44. Feb 29, 2020
45. Mar 31, 2020
46. Apr 30, 2020
47. May 31, 2020
48. Jun 30, 2020
49. Jul 31, 2020
50. Aug 31, 2020
51. Sep 30, 2020
52. Oct 31, 2020
53. Nov 30, 2020
54. Dec 31, 2020
55. Jan 31, 2021
56. Feb 28, 2021
57. Mar 31, 2021
58. Apr 30, 2021
59. May 31, 2021
60. Jun 30, 2021
61. Jul 31, 2021
62. Aug 31, 2021
63. Sep 30, 2021
64. Oct 31, 2021
65. Nov 30, 2021
66. Dec 31, 2021
67. Jan 31, 2022
68. Feb 28, 2022
69. Mar 31, 2022
70. Apr 30, 2022
71. May 31, 2022
Total (Σ):

Show all

VarianceNKE = Σ(RNKE,tRNKE)2 ÷ (71 – 1)
= ÷ (71 – 1)
=

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

CovarianceNKE, S&P 500 = Σ(RNKE,tRNKE)×(RS&P 500,tRS&P 500) ÷ (71 – 1)
= ÷ (71 – 1)
=


Systematic Risk (β) Estimation

Microsoft Excel
VarianceNKE
VarianceS&P 500
CovarianceNKE, S&P 500
Correlation coefficientNKE, S&P 5001
βNKE2
αNKE3

Calculations

1 Correlation coefficientNKE, S&P 500
= CovarianceNKE, S&P 500 ÷ (Standard deviationNKE × Standard deviationS&P 500)
= ÷ ( × )
=

2 βNKE
= CovarianceNKE, S&P 500 ÷ VarianceS&P 500
= ÷
=

3 αNKE
= AverageNKE – βNKE × AverageS&P 500
= ×
=


Expected Rate of Return

Microsoft Excel
Assumptions
Rate of return on LT Treasury Composite1 RF
Expected rate of return on market portfolio2 E(RM)
Systematic risk (β) of Nike Inc. common stock βNKE
 
Expected rate of return on Nike Inc. common stock3 E(RNKE)

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(RNKE) = RF + βNKE [E(RM) – RF]
= + []
=