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Capital asset pricing model (CAPM) indicates what should be the expected or required rate of return on risky assets like Johnson & Johnson's
common stock.
Rates of Return
Systematic Risk () Estimation
Expected Rate of Return
See Also:
Novartis AG (NVS), CAPM
Pfizer Inc. (PFE), CAPM
Merck & Co. Inc. (MRK), CAPM
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Rates of Return
Johnson & Johnson, monthly rates of return
Johnson & Johnson (JNJ)
t
Date
1.
PriceJNJ,t1
57.69
50.00
DividendJNJ,t1
PriceS&P 500,t
RS&P 500,t3
825.88
0.46
-12.53%
735.09
-10.99%
2.
52.60
5.20%
797.87
8.54%
3.
52.36
-0.46%
872.81
9.39%
4.
55.16
6.28%
919.14
5.31%
5.
56.80
2.97%
919.32
0.02%
6.
60.89
7.20%
987.48
7.41%
7.
60.44
0.07%
1,020.62
3.36%
8.
60.89
0.74%
1,057.08
3.57%
9.
59.05
-3.02%
1,036.19
-1.98%
10.
62.84
7.25%
1,095.63
5.74%
11.
64.41
2.50%
1,115.10
1.78%
12.
62.86
-2.41%
1,073.87
-3.70%
13.
63.00
1.00%
1,104.49
2.85%
14.
65.20
3.49%
1,169.43
5.88%
15.
64.30
-1.38%
1,186.69
1.48%
16.
58.30
-8.49%
1,089.41
-8.20%
17.
59.06
1.30%
1,030.71
-5.39%
18.
58.09
-1.64%
1,101.60
6.88%
19.
57.02
-0.91%
1,049.33
-4.74%
20.
61.96
8.66%
1,141.20
8.76%
21.
63.74
2.87%
1,183.26
3.69%
22.
61.55
-2.59%
1,180.55
-0.23%
0.49
0.49
0.49
0.49
0.54
0.54
0.54
23.
61.85
0.49%
1,257.64
6.53%
24.
59.77
-3.36%
1,286.12
2.26%
25.
61.44
3.70%
1,327.22
3.20%
26.
59.25
-3.56%
1,325.83
-0.10%
27.
65.72
10.92%
1,363.61
2.85%
28.
67.29
3.26%
1,345.20
-1.35%
29.
66.52
-1.14%
1,320.64
-1.83%
30.
64.79
-2.60%
1,292.28
-2.15%
31.
65.80
2.44%
1,218.89
-5.68%
32.
63.69
-3.21%
1,131.42
-7.18%
33.
64.39
1.10%
1,253.30
10.77%
34.
64.72
1.40%
1,246.96
-0.51%
35.
65.58
1.33%
1,257.60
0.85%
36.
65.91
0.50%
1,312.41
4.36%
37.
65.08
-0.39%
1,365.68
4.06%
38.
65.96
1.35%
1,408.47
3.13%
39.
65.10
-1.30%
1,397.91
-0.75%
40.
62.43
-3.16%
1,310.33
-6.27%
41.
67.56
8.22%
1,362.16
3.96%
42.
69.22
2.46%
1,379.32
1.26%
43.
67.43
-1.70%
1,406.58
1.98%
0.54
0.57
0.57
0.57
0.57
0.61
0.61
44.
68.91
2.19%
1,440.67
2.42%
45.
70.82
2.77%
1,412.16
-1.98%
46.
69.73
-0.68%
1,416.18
0.28%
47.
70.10
0.53%
1,426.19
0.71%
48.
73.92
5.45%
1,498.11
5.04%
49.
76.11
3.79%
1,514.68
1.11%
50.
81.53
7.12%
1,569.19
3.60%
51.
85.23
4.54%
1,597.57
1.81%
52.
84.18
-0.46%
1,630.74
2.08%
53.
85.86
2.00%
1,606.28
-1.50%
54.
93.50
8.90%
1,685.73
4.95%
55.
86.41
-6.88%
1,632.97
-3.13%
56.
86.69
0.32%
1,681.55
2.97%
57.
92.61
6.83%
1,756.54
4.46%
58.
94.66
2.93%
1,805.81
2.80%
59.
91.59
-3.24%
1,848.36
2.36%
0.61
0.61
0.66
0.66
0.66
Average:
1.17%
1.47%
Standard Deviation:
4.30%
4.42%
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Data in USD $ per share of common stock, adjusted for splits and stock dividends.
Rate of return on S&P 500 (the market portfolio proxy) during period t
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18.50
VarianceS&P 500
19.58
11.58
0.61
JNJ2
0.59
JNJ3
Calculations
0.30
Top
RF
E(RM)
JNJ
2.68%
13.68%
0.59
Expected rate of return on Johnson & Johnson's common stock3 E(RJNJ) 9.18%
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).
Calculations
2
See Details
E(RJNJ) = RF + JNJ [E(RM) RF]
= 2.68% + 0.59 [13.68% 2.68%]
= 9.18%