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

Zoetis Inc. (NYSE:ZTS)

Capital Asset Pricing Model (CAPM)

Intermediate level

Rates of Return

Zoetis Inc., monthly rates of return

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Zoetis Inc. (ZTS) Standard & Poor’s 500 (S&P 500)
t Date PriceZTS,t1 DividendZTS,t1 RZTS,t2 PriceS&P 500,t RS&P 500,t3
Jan 31, 2015 42.73 1,994.99
1. Feb 28, 2015 46.09 7.86% 2,104.50 5.49%
2. Mar 31, 2015 46.29 0.43% 2,067.89 -1.74%
3. Apr 30, 2015 44.42 0.083 -3.86% 2,085.51 0.85%
. . . . . . .
. . . . . . .
. . . . . . .
58. Nov 30, 2019 120.52 -5.78% 3,140.98 3.40%
59. Dec 31, 2019 132.35 9.82% 3,230.78 2.86%
Average: 2.13% 0.88%
Standard deviation: 5.42% 3.45%
Zoetis Inc. (ZTS) Standard & Poor’s 500 (S&P 500)
t Date PriceZTS,t1 DividendZTS,t1 RZTS,t2 PriceS&P 500,t RS&P 500,t3
Jan 31, 2015 42.73 1,994.99
1. Feb 28, 2015 46.09 7.86% 2,104.50 5.49%
2. Mar 31, 2015 46.29 0.43% 2,067.89 -1.74%
3. Apr 30, 2015 44.42 0.083 -3.86% 2,085.51 0.85%
4. May 31, 2015 49.77 12.04% 2,107.39 1.05%
5. Jun 30, 2015 48.22 -3.11% 2,063.11 -2.10%
6. Jul 31, 2015 48.98 1.58% 2,103.84 1.97%
7. Aug 31, 2015 44.87 0.083 -8.22% 1,972.18 -6.26%
8. Sep 30, 2015 41.18 -8.22% 1,920.03 -2.64%
9. Oct 31, 2015 43.01 4.44% 2,079.36 8.30%
10. Nov 30, 2015 46.70 0.083 8.77% 2,080.41 0.05%
11. Dec 31, 2015 47.92 2.61% 2,043.94 -1.75%
12. Jan 31, 2016 43.05 0.095 -9.96% 1,940.24 -5.07%
13. Feb 29, 2016 41.06 -4.62% 1,932.23 -0.41%
14. Mar 31, 2016 44.33 7.96% 2,059.74 6.60%
15. Apr 30, 2016 47.03 0.095 6.30% 2,065.30 0.27%
16. May 31, 2016 47.42 0.83% 2,096.95 1.53%
17. Jun 30, 2016 47.46 0.095 0.28% 2,098.86 0.09%
18. Jul 31, 2016 50.47 6.34% 2,173.60 3.56%
19. Aug 31, 2016 51.10 1.25% 2,170.95 -0.12%
20. Sep 30, 2016 52.01 1.78% 2,168.27 -0.12%
21. Oct 31, 2016 47.80 -8.09% 2,126.15 -1.94%
22. Nov 30, 2016 50.38 0.095 5.60% 2,198.81 3.42%
23. Dec 31, 2016 53.53 6.25% 2,238.83 1.82%
24. Jan 31, 2017 54.94 0.105 2.83% 2,278.87 1.79%
25. Feb 28, 2017 53.31 -2.97% 2,363.64 3.72%
26. Mar 31, 2017 53.37 0.11% 2,362.72 -0.04%
27. Apr 30, 2017 56.11 0.105 5.33% 2,384.20 0.91%
28. May 31, 2017 62.28 11.00% 2,411.80 1.16%
29. Jun 30, 2017 62.38 0.105 0.33% 2,423.41 0.48%
30. Jul 31, 2017 62.52 0.22% 2,470.30 1.93%
31. Aug 31, 2017 62.70 0.29% 2,471.65 0.05%
32. Sep 30, 2017 63.76 1.69% 2,519.36 1.93%
33. Oct 31, 2017 63.82 0.09% 2,575.26 2.22%
34. Nov 30, 2017 72.29 0.105 13.44% 2,647.58 2.81%
35. Dec 31, 2017 72.04 -0.35% 2,673.61 0.98%
36. Jan 31, 2018 76.73 0.126 6.69% 2,823.81 5.62%
37. Feb 28, 2018 80.86 5.38% 2,713.83 -3.89%
38. Mar 31, 2018 83.51 3.28% 2,640.87 -2.69%
39. Apr 30, 2018 83.48 0.126 0.11% 2,648.05 0.27%
40. May 31, 2018 83.70 0.26% 2,705.27 2.16%
41. Jun 30, 2018 85.19 1.78% 2,718.37 0.48%
42. Jul 31, 2018 86.48 0.126 1.66% 2,816.29 3.60%
43. Aug 31, 2018 90.60 4.76% 2,901.52 3.03%
44. Sep 30, 2018 91.56 1.06% 2,913.98 0.43%
45. Oct 31, 2018 90.15 -1.54% 2,711.74 -6.94%
46. Nov 30, 2018 93.87 0.126 4.27% 2,760.17 1.79%
47. Dec 31, 2018 85.54 -8.87% 2,506.85 -9.18%
48. Jan 31, 2019 86.16 0.164 0.92% 2,704.10 7.87%
49. Feb 28, 2019 94.23 9.37% 2,784.49 2.97%
50. Mar 31, 2019 100.67 6.83% 2,834.40 1.79%
51. Apr 30, 2019 101.84 0.164 1.33% 2,945.83 3.93%
52. May 31, 2019 101.05 -0.78% 2,752.06 -6.58%
53. Jun 30, 2019 113.49 12.31% 2,941.76 6.89%
54. Jul 31, 2019 114.89 0.164 1.38% 2,980.38 1.31%
55. Aug 31, 2019 126.42 10.04% 2,926.46 -1.81%
56. Sep 30, 2019 124.59 -1.45% 2,976.74 1.72%
57. Oct 31, 2019 127.92 0.164 2.80% 3,037.56 2.04%
58. Nov 30, 2019 120.52 -5.78% 3,140.98 3.40%
59. Dec 31, 2019 132.35 9.82% 3,230.78 2.86%
Average: 2.13% 0.88%
Standard deviation: 5.42% 3.45%

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 ZTS during period t

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


Systematic Risk (β) Estimation

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VarianceZTS 29.39
VarianceS&P 500 11.88
CovarianceZTS, S&P 500 9.55
Correlation coefficientZTS, S&P 5001 0.51
βZTS2 0.80
αZTS3 1.43

Calculations

1 Correlation coefficientZTS, S&P 500
= CovarianceZTS, S&P 500 ÷ (Standard deviationZTS × Standard deviationS&P 500)
= 9.55 ÷ (5.42 × 3.45)

2 βZTS
= CovarianceZTS, S&P 500 ÷ VarianceS&P 500
= 9.55 ÷ 11.88

3 αZTS
= AverageZTS – βZTS × AverageS&P 500
= 2.130.80 × 0.88


Expected Rate of Return

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Assumptions
Rate of return on LT Treasury Composite1 RF 1.54%
Expected rate of return on market portfolio2 E(RM) 12.43%
Systematic risk (β) of Zoetis Inc.’s common stock βZTS 0.80
 
Expected rate of return on Zoetis Inc.’s common stock3 E(RZTS) 10.29%

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(RZTS) = RF + βZTS [E(RM) – RF]
= 1.54% + 0.80 [12.43%1.54%]
= 10.29%