Irish Calculators
Saving & investing

Excess Return Calculator: Benchmark or CAPM

Measure how far an asset's return is above or below a chosen reference return. Match the period and currency, and treat CAPM as a model assumption rather than a forecast.

Runs privately in your browserMethod reviewed

Your numbers

%
Same period and currency as the reference.
%
%
%
Sensitivity to the same market benchmark.
Your figures stay on this device.

How the calculation works

Excess return measures a difference against a chosen reference, rather than the investment's standalone profit. You can enter a benchmark return directly or construct a CAPM expected return from a risk-free return, market return and supplied beta.

Known-reference excess = asset return minus reference return. CAPM expected return = risk-free return + beta × (market return − risk-free return); subtract it from asset return.

  1. Define the comparison period

    Align the asset and reference returns before calculation. This tool does not annualise a monthly return or convert between price and total return.

  2. Calculate the reference

    Direct mode uses the entered benchmark. CAPM adds the risk-free return to beta times the difference between expected market return and the risk-free return.

  3. Subtract the reference from the asset return

    The difference is reported in percentage points. A positive value means the asset exceeds that reference for the specified period and assumptions.

Worked example: Check Excess return

Sample inputs demonstrate the method. They are not a forecast or product offer.

The first example compares an asset return of 12% with an 8% benchmark. Subtracting the reference gives four percentage points of excess return, without any additional annualisation.

Reference return
Known benchmark or expected return
Asset return (%)
12
Benchmark return (%)
8

Expected result

Excess return
4
Worked example: Check Excess return

Sample inputs demonstrate the method. They are not a forecast or product offer.

Reference return
CAPM expected return from supplied inputs
Asset return (%)
12
Risk-free return for the comparison period (%)
2
Expected market return for the same period (%)
7
Supplied asset beta
1.2

Expected result

Excess return
4

Understanding your result

A positive excess return is not necessarily a positive investment return. An asset can lose less than a falling benchmark and still show a positive difference.

The CAPM comparison is a model-based reference, not a fitted historical alpha or proof of investment skill. Changing beta or the expected market return changes the reference.

Questions you might have

What does the result include?

Compare an asset return with a supplied benchmark or an expected return estimated using CAPM.

Which limits should I check?

Match currency, horizon and total-return treatment. CAPM is a one-factor assumption, not a prediction or an estimate of beta.

Choosing the right inputs

Asset return
Use the asset return for the same horizon, currency and dividend treatment as the reference. Differences in those conventions can overwhelm the comparison.
Reference return
Benchmark mode subtracts a known reference directly. CAPM mode first derives its reference from the additional inputs.
Supplied asset beta
Supply beta relative to the same market used in CAPM. The calculator does not estimate beta from price history.

Common mistakes to avoid

  • Do not interpret a four-percentage-point difference as a 4% relative improvement.
  • Do not enter the market risk premium in a field asking for total expected market return.

Assumptions to check

  • Match currency, horizon and total-return treatment. CAPM is a one-factor assumption, not a prediction or an estimate of beta.
  • All calculations run on your device. Figures are scenarios based on your inputs, not investment recommendations.

Sources and method

Read our calculation and testing approach.