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Apple vs S&P 500 Returns Analysis 2000-2016

This document contains information about the stock performance of Apple and the S&P 500 from 2000-2016 including price levels over time, returns, variance in returns, their correlation, and concepts from the Capital Asset Pricing Model (CAPM) such as beta and the partitioning of total risk into systematic and idiosyncratic components. It shows that Apple had much higher and more volatile returns than the S&P 500 over this period.

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Guramios
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36 views8 pages

Apple vs S&P 500 Returns Analysis 2000-2016

This document contains information about the stock performance of Apple and the S&P 500 from 2000-2016 including price levels over time, returns, variance in returns, their correlation, and concepts from the Capital Asset Pricing Model (CAPM) such as beta and the partitioning of total risk into systematic and idiosyncratic components. It shows that Apple had much higher and more volatile returns than the S&P 500 over this period.

Uploaded by

Guramios
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Stock Market Level, 2000-2016, 2000=100

Apple, Inc. and S&P 500 Monthly Adjusted Price


2000-2016, 2000=100
Apple, Inc. and S&P 500 Monthly Returns, 2000-2016
Variance of Apple vs Variance of S&P500
• Standard deviation of Apple capital gain in decade shown is
12.8% a month (not annualized) (arithmetic mean 3.47% a
month, geometric mean 2.65% a month)
• 1.0347^123=65, 1.0265^123=25
• Standard deviation of S&P 500 return in decade shown is 4.7%
(arithmetic mean capital gain mean 0.01%, geometric mean -
0.16% a month, meaning we’ve lost money)
Scatter, Apple vs S&P 500 Returns Monthly
Feb 2000-Jan 2016
Same Scatter with Regression Line
Beta
• The CAPM implies that the expected return on the ith asset
is determined from its beta
• Beta (βi) is the regression slope coefficient when the return
on the ith asset is regressed on the return on the market
• Fundamental equation of the CAPM:

ri = rf + b i (rm - rf )
Market Risk versus Idiosyncratic Risk
• By construction, the residuals of error terms in a regression
are uncorrelated with the fitted or predicted value
• So, the variance of the return of a stock is equal to its beta
squared times the variance of the market return (systematic
risk) plus the variance of the residual in the regression
(idiosyncratic risk)

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