I know about CAPM. My question is if this method is also viable:
Calculate monthly logReturns
sym date open high low close volume logReturns
-----------------------------------------------------------------
AAPL 2019.08.09 201.3 202.76 199.29 200.99 24423000 -0.0252867
AAPL 2019.07.31 216.42 221.37 211.3 213.04 69281400 0.03197147
AAPL 2019.06.28 198.68 199.5 197.05 197.92 31110600 0.05327795
AAPL 2019.05.31 176.23 177.99 174.99 175.07 27043600 -0.05927072
Extract the frequency table
logReturns| frq
----------| ---
-0.09 | 1
-0.07 | 1
-0.06 | 1
-0.055 | 2
-0.05 | 1
...
Calculate the probability of a return occurring by taking the frq and divide by sum of frq
logReturns| frq prb
----------| --------------
-0.09 | 1 0.01515152
-0.07 | 1 0.01515152
-0.06 | 1 0.01515152
-0.055 | 2 0.03030303
...
calculate returns and their sum
logReturns| frq prb ret
----------| ----------------------------
-0.09 | 1 0.01515152 -0.001363636
-0.07 | 1 0.01515152 -0.001060606
-0.06 | 1 0.01515152 -0.0009090909
-0.055 | 2 0.03030303 -0.001666667
return: 0.003787879
Is this a valid way? I know for the expected returns of a portfolio we assume a bad, stagnant or strong economy and we calculate the returns by doing that. I couldn't find anywhere something about the expected returns of a single stock.