Stock Beta Calculator — CAPM Expected Return
Enter a stock's beta coefficient, the current risk-free rate, and the expected market return to compute the Capital Asset Pricing Model (CAPM) required return. The Security Market Line chart shows where your stock sits on the linear risk–return frontier.
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E(r) = Rf + β × (Rm − Rf) — the return the stock should earn for its systematic risk
- 1
Market risk premium
10 % − 4.5 % = 5.5 %The extra return investors demand for bearing market-wide (systematic) risk. - 2
Stock risk premium
1.3 × 5.5 % = 7.15 % - 3
CAPM expected return
4.5 % + 7.15 % = 11.65 %
How does this calculator work?
CAPM: E(r) = Rf + β × (Rm − Rf). With β = 1.3, Rf = 4.5%, Rm = 10%, E(r) = 11.65%. Beta > 1 means more volatile than market; beta < 1 is defensive. The Security Market Line plots this linear risk-return relationship for all assets. Update Rf and Rm to current conditions.
Formula
How this is calculated
The Capital Asset Pricing Model prices a stock's expected return purely by its systematic (market-wide) risk, measured by beta β. A beta of 1.0 means the stock mirrors the market exactly; β > 1 amplifies market swings (more volatile); β < 1 is more defensive; β < 0 moves against the market (rare — certain inverse ETFs, gold miners in some periods).
The CAPM formula E(r) = Rf + β × (Rm − Rf) adds to the risk-free rate the extra return investors demand for bearing β units of market risk, where (Rm − Rf) is the market risk premium. For example, with Rf = 4.5%, Rm = 10% and β = 1.3, the CAPM return is 4.5% + 1.3 × 5.5% = 11.65%.
The chart plots the Security Market Line (SML): the line connecting every asset's (β, expected return) pair. Stocks above the SML are underpriced by the model (expected return exceeds required); stocks below it are overpriced. CAPM is a single-factor model; multi-factor extensions (Fama-French, Carhart) add size, value and momentum factors. The Rf and Rm defaults shown are examples — update them to current market conditions.
Frequently asked questions
A stock with β = 1.3 is expected to move 1.3% for each 1% market move, in the same direction. In a 10% market rally it would be expected to gain ~13%; in a 10% fall, lose ~13%. Higher beta means higher expected return but also higher risk.
Major financial data sites (Yahoo Finance, Bloomberg, Reuters) publish 5-year monthly beta by default. Beta changes over time and differs by the benchmark index used. Use a beta from the same market your Rm assumption represents for a consistent comparison.
No — it is the minimum return investors should demand for the level of systematic risk. Stocks trading above fair value will underperform the CAPM return; undervalued stocks will outperform. Think of it as a hurdle rate, not a prediction.
TG we-Calculate Editorial Team. (2026). Stock Beta Calculator — CAPM Expected Return [Online calculator]. TG we-Calculate. https://we-calculate.com/calculator/beta-stock-calculator
TG we-Calculate Editorial Team. "Stock Beta Calculator — CAPM Expected Return." TG we-Calculate. 2026. https://we-calculate.com/calculator/beta-stock-calculator.
TG we-Calculate Editorial Team, "Stock Beta Calculator — CAPM Expected Return," TG we-Calculate, 2026. [Online]. Available: https://we-calculate.com/calculator/beta-stock-calculator
@misc{wecalculate_beta_stock_calculator, title = {Stock Beta Calculator — CAPM Expected Return}, author = {{TG we-Calculate Editorial Team}}, howpublished = {\url{https://we-calculate.com/calculator/beta-stock-calculator}}, year = {2026}, note = {TG we-Calculate} }
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