CAPM Beta Formula
To calculate a CAPM beta, subtract the expected market return from the expected investment return, then divide by the result of the market return minus the risk-free return.
How is beta calculated in CAPM?
Beta could be calculated by first dividing the security's standard deviation of returns by the benchmark's standard deviation of returns. The resulting value is multiplied by the correlation of the security's returns and the benchmark's returns.
How do you calculate beta?
Beta can be calculated by dividing the asset's standard deviation of returns by the market's standard deviation. The result is then multiplied by the correlation of the security's return and the market's return.
How is CAPM calculated?
In layman's terms, the CAPM formula is: Expected return of the investment = the risk-free rate + the beta (or risk) of the investment * the expected return on the market – the risk free rate (the difference between the two is the market risk premium).