The other posters who are familiar with CAP-M are correct. The proxy for the risk free rate of return are US Treasuries. You can find the rates of return for Treasuries on either yahoo finance or google finance.
You may also notice that betas tend to differ slightly - it depends on whether they're historical, forward looking, based on consensus, etc.
You can also find the rate of return on the market (use the S&P Index) at either google finance or yahoo finance.
Here's part of an article on the Capital Asset Pricing Model from Investopedia.com:
Here is the formula:
rj = rf + b(rm-rf)
where:
rj= expected return on asset j
rf= ten year US Treasury rate (the "risk free" rate)
b= beta
rm=market return
CAPM's starting point is the risk-free rate - typically a 10-year government bond yield. To this is added a premium that equity investors demand to compensate them for the extra risk they accept. This equity market premium consists of the expected return from the market as a whole less the risk-free rate of return. The equity risk premium is multiplied by a coefficient that Sharpe called "beta".
Beta
According to CAPM, beta is the only relevant measure of a stock's risk. It measures a stock's relative volatility - that is, it shows how much the price of a particular stock jumps up and down compared with how much the stock market as a whole jumps up and down. If a share price moves exactly in line with the market, then the stock's beta is 1. A stock with a beta of 1.5 would rise by 15% if the market rose by 10%, and fall by 15% if the market fell by 10%. (For further reading, see Beta: Gauging Price Fluctuations and Beta: Know The Risk.)
Beta is found by statistical analysis of individual, daily share price returns, in comparison with the market's daily returns over precisely the same period. In their classic 1972 study titled "The Capital Asset Pricing Model: Some Empirical Tests", financial economists Fischer Black, Michael C. Jensen and Myron Scholes confirmed a linear relationship between the financial returns of stock portfolios and their betas. They studied the price movements of the stocks on the New York Stock Exchange between 1931 and 1965.
Financial information
Tuesday, December 6, 2011
How to calculate market return using historical data For Portfolio Management
The link is broken for some reason (could be me or maybe it's on your side)... however, I don't need it to help you.
CAPM:
Stock Return = Beta (Rm - Rf) + Rf
Where Rf = Risk Free rate and Rm = Market return
"Market return" should be the geometric average return from inception (the earliest date) to today. If you're looking for market return of 1984, then you take the price of the market on December 31, divide by the price on 1 January and then subtract one. The Risk Free rate is the long-term sovereign rate (should be given to you).
Market risk is the standard deviation of the market (on a daily basis). This is the sum of the square differences from the mean divided by the number of days (minus one).
CAPM:
Stock Return = Beta (Rm - Rf) + Rf
Where Rf = Risk Free rate and Rm = Market return
"Market return" should be the geometric average return from inception (the earliest date) to today. If you're looking for market return of 1984, then you take the price of the market on December 31, divide by the price on 1 January and then subtract one. The Risk Free rate is the long-term sovereign rate (should be given to you).
Market risk is the standard deviation of the market (on a daily basis). This is the sum of the square differences from the mean divided by the number of days (minus one).
Monday, November 28, 2011
Working capital
Net Working Capital = Current Assets − Current Liabilities
Net Operating Working Capital = Current Assets − Non Interest-bearing Current Liabilities
Equity Working Capital = Current Assets − Current Liabilities − Long-term Debt
Saturday, November 26, 2011
Inventory turnover & Inventory turnover in days ratio calculation
During the year, ABCD Company had a cost of goods sold of $1,344. inventory at the end of year was $ 422. in this case, Inventory Turnover can be calculated as follows:
Inventory Turn Over = Cost of Goods Sold/ Inventory
= 1344/422
= 3.2 Times
ABCD sold off or turned over entire inventory 3.2 times. The higher the ratio is, the more efficiently we are managing inventory. Now Inventory turnover in days ratio calculation
Inventory Turn Over in days = 365* days/ Inventory Turn over
= 365 days/3.2
= 114 days
* the days can be assume 360 days also.
Inventory Turn Over = Cost of Goods Sold/ Inventory
= 1344/422
= 3.2 Times
ABCD sold off or turned over entire inventory 3.2 times. The higher the ratio is, the more efficiently we are managing inventory. Now Inventory turnover in days ratio calculation
Inventory Turn Over in days = 365* days/ Inventory Turn over
= 365 days/3.2
= 114 days
* the days can be assume 360 days also.
Turnover ratio
Turnover ratio:
• Cash to sales = Cash/sales
• Accounts receivable to sales = Accounts receivable/sales
• Inventory to sales = Inventory/sales
• Quick assets to sales = Quick assets/sales
• Current assets to sales = Current assets/sales
• Working capital to sales =Working capital/sales
• Net worth to sales = Net worth/sales
• Total assets to sales = Total assets/sales
Turnover measure or asset management is known as assets utilization ratio. it described how efficiently or intensively a firm use its assets to generates sales.
Liquid assets to current debt ratio
Liquid assets to current debt ratio:
• Cash to current liabilities = Cash/current liabilities
• Quick assets to current liabilities = Quick assets/current liabilities
• Current ratio = Current Assets/Current Liabilities
Liquid assets to current debt test ratio help find the portion of liquid assets in per Unit current debt .
• Cash to current liabilities = Cash/current liabilities
• Quick assets to current liabilities = Quick assets/current liabilities
• Current ratio = Current Assets/Current Liabilities
Liquid assets to current debt test ratio help find the portion of liquid assets in per Unit current debt .
How to calculate Liquid assets to total assets ratio
Liquid assets to total assets ratio:
• Cash to total assets = Cash/total assets
• Quick assets to total assets = Quick assets/total assets
• Current assets to total assets = Current assets to total assets
• Working capital to total assets = Working capital/total assets
these ratio test helps company to calculate how much liquid assets is available in total assets
• Cash to total assets = Cash/total assets
• Quick assets to total assets = Quick assets/total assets
• Current assets to total assets = Current assets to total assets
• Working capital to total assets = Working capital/total assets
these ratio test helps company to calculate how much liquid assets is available in total assets
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