Evaluating CAPM's Practical Utility in U.S. Wholesale Investment: A Case Study of Costco

The great uncertainty brought to the global capital market by pandemic changes has floored the predictions of market changes. We applied the Capital Asset Pricing Model ( U.S. Wholesale company: Costco Wholesale Corporation) to evaluate the utility of CAPM in pricing U.S. wholesale companies. This work investigates to what extent the CAPM model reflects the risk-return conditions for the wholesale industry and invokes investment choice. This study looked at both financial and stock-level Costco performance over the last decade to test the empirical validity of CAPM against market performance and see what the accuracies are in terms of expected returns that can be forecasted through government-disclosed data. While the results demonstrate that CAPM does provide useful insights on the general market (from which regression coefficients can be derived pertaining to the overall trend), its predictive accuracy and relevance for forecasting stock performance remain somewhat poor due to the characteristics of companies or overall market factors. These results have business relevance for investors, managers, and regulators within wholesale, which summarizes the benefits and flaws of the CAPM model being used in investment decisions within wholesale.