CAPM calculator — expected return from beta
Pick a stock: its beta against the home index, the risk-free rate and the index's return fill in, and CAPM gives the required return.
E(R) = Rf + β × (Rm − Rf)
In plain words 💡
CAPM says the market only pays you for risk you can't diversify away — how strongly something moves with the whole market. That's what beta measures 📊: beta 1 moves like the market, 1.5 moves half as much again, 0.5 half as much, 0 doesn't care about the market at all.
The formula is simple: start from the risk-free rate (think T-bills 💵) and add the market's risk premium multiplied by beta. The result is the return the model says investors should require — handy as a discount rate when valuing a company.
Where the model is wrong ⚠️
It's a required return in theory, not a forecast. In real data beta explains returns poorly — small caps, "cheap" stocks and momentum historically earned returns CAPM doesn't predict (hence multi-factor models such as Fama-French). Beta also drifts over time and depends on the window you measure it over, and an index's return over recent years says nothing about the next ones.
Read more 📚
An educational tool: it runs a formula on historical data or on the numbers you type. It is not a forecast or a recommendation, and it knows nothing about your situation.