I'm going to show you how to estimate cap M using Excel. We're going to use Coca-Cola as our example company to estimate cap M. The first thing we need is stock returns data. I think the easiest place to get that for our purposes is Yahoo Finance. So we go over to Yahoo Finance and type in K-O, which is Coca-Cola's ticker symbol. Once we're on this page, we need to go to historical prices. I want to estimate cap M using five years of daily returns. So my start date is going to be December 31st, 2010, and my end date is going to be December 31st, 2015. Notice that the daily returns check box is highlighted here. If we wanted to estimate cap M with monthly returns, we would have to click monthly. So now we click get prices. And then we have to scroll to the bottom to get our spreadsheet of stock data. So the first thing we need to do is to switch these from starting our chronological order to reverse chronological order. So I'm going to freeze a top cell and then sort it from oldest to newest. So now it starts at the beginning of our time period and works its way down. So we've got the date, the opening price, the high low of the day, the closing price, and then volume and the adjusted closing price. Adjusted closing price, adjust for dividend payments. This is the column we're going to use. So the first thing we need to do is to calculate the returns of Coca-Cola. To do this, we simply take today's return, subtract off yesterday's return, and divide by yesterday's return. Notice that this is a decimal representation of the return. I actually want to use the percentage representation of returns. So I'm going to multiply this by 100. Now we just have to drag this down. I'm going to use shortcuts, but you can just as easily use your mouse to drag it down. So now that we have the returns of Coca-Cola, we need to get the returns for the stock market or the market as a whole. I want you to use the Fama French or the Kenneth French's data website to get the market returns. So we Google Kenneth French data, and you'll be brought to his data page. Go to US Research Returns, and then under US Research Returns data, we have three Fama French three factor data sources. For daily KEPM, we need the Fama French three factors daily. If we were estimating KEPM with monthly returns, we would use the Fama French three factors, this top CSV file. So download the daily Fama French three factors CSV file. Once you have it open, you'll see here's the date, here's the excess market return, there's the two Fama French factors, and then the risk free rate. We need to copy and paste this data into the stock returns for Coca-Cola that file. Notice that these returns start at July 1st, 1926. We only want the returns starting on January 1st or the beginning of January in 2011. So we need to scroll down until we get to January 3rd, 2011. So I'm going to highlight everything, drag it down, copy it, and then paste it into this file. Notice that I copied over the date. I did this so I can ensure that the date in the Fama French file is equal to the date on our stock returns from Yahoo Finance. So they both start on January 3rd and they both end on December 31st, so we're good there. Now I'm just going to delete the file to get it out of the way. So this is our excess market return. This is often abbreviated RMRF. These are the two Fama French factors. We don't need these to estimate KFM, so I'm going to hide them. And this is the risk free rate abbreviated RF. Now we need to calculate the excess market return for the stock for Coca-Cola. So I apologize. I meant excess return for Coca-Cola, not excess market return for Coca-Cola. So we take the return of Coca-Cola and we subtract off the risk free rate. Now we just need to drag this down. Once again, I'm using shortcuts to speed this up. Now we have all the data that we need in order to calculate KFM using daily stock returns. We need to use the data analysis tool pack in Excel, which is under data and then data analysis. You might not have this installed. If you don't have this installed by default, you need to go over to file, options, add-ins. And then if you don't have it installed, data or analysis tool pack is going to show up under the inactive application add-ins. If this is the case, go down to manage and click go and you'll see the analysis tool pack. And now it will be installed. Now we need to run a regression of Coca-Cola's excess return on the market's excess return. So click on data analysis, then regression. The Y-range is going to be our excess market return, or sorry, our excess return for Coca-Cola. So we're going to highlight the entire excess return column. The input, the X-range is going to be our RMRF, our excess market return. Once we have that, we click OK, and a new sheet is created. This has the output from our linear regression. The important number right here is this, oops, this 0.58. This is the beta estimate from capM. This is the abnormal return or the excess return during this time period for Coca-Cola. But what we care about for capM for our purposes right now is beta. So that's all you actually have to need to do to calculate beta using capM.