Returns the Capital Asset Pricing Model (CAPM) beta.
Syntax
NxCAPM($R^i$, $R^b$, $R_f$, Freq)
- $R^i$
- is the portfolio simple rate of returns data series (a one-dimensional array of cells (e.g., rows or columns)).
- $R^b$
- is the index/benchmark simple returns data (a one-dimensional array of cells (e.g., rows or columns)).
- $R_f$
- is the risk-free simple returns data (a single value or a one-dimensional array of cells (e.g., rows or columns)). If missing, a zero(0) risk-free return is assumed.
- Freq
- is the data sampling frequency per year (i.e., number of data points in one year) (e.g., 12 = monthly, 4 = quarterly, etc.). If missing, a monthly frequency is assumed.
Status
The NxCAPM function is available starting with NumXL version 1.68 CAMEL.
Remarks
- The Capital Asset Pricing Model (CAPM) describes the relationship between systematic risk and expected return for assets.
- Per the CAPM, the formula for calculating the expected return of an asset is:
$$E[R^i] = R_f + \beta \times (E[R^b] - R_f)$$
Where:- $E[R^i]$ is the expected return on investment.
- $R_f$ is the risk-free rate of return.
- $E[R^b]$ is the expected return on the overall market.
- $\beta$ is the CAPM beta of the investment.
- The beta measures how much risk the investment will add to a portfolio that looks like the market.
- The sample data ($R^i$, $R^b$, or $R_f$) may include missing values.
- The number of rows of the response variable ($R^i$) must equal the number of rows of the explanatory variable ($R^b$ or $R_f$).
- Observations (i.e., rows) with missing values in X or Y are removed.
- If the risk-free rate of return ($R_f$) argument contains one value, it is assumed the value is the risk-free annual rate of return.
Examples
Example 1:
|
|
Formula | Description (Result) |
---|---|
=NxCAPM(\$B\$2:\$B\$14,\$C\$2:\$C\$14,\$D\$2:\$D\$14) | CAPM Beta (1.098847) |
Files Examples
Related Links
- Wikipedia - Compound annual growth rate
- Investopedia - Up-Market Capture Ratio
- Investopedia - Down-Market Capture Ratio
References
- Bodi, Kane and Marcus, Investments, 8th Edition. McGraw-Hill, ISBN: 007338237X
- Hamilton, J .D.; Time Series Analysis, Princeton University Press (1994), ISBN 0-691-04289-6
- Tsay, Ruey S.; Analysis of Financial Time Series John Wiley & SONS. (2005), ISBN 0-471-690740
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