Risk-free rate

Three EqtyTrk calculations require a risk-free rate: WACC cost-of-equity, the CAPM-adjusted alpha used by the etsr_capm correlate target, and the Sharpe ratio shown on portfolio detail pages. All three consume the daily 1-month Treasury bill yield published in Ken French's data library, refreshed daily by the same Lambda phase that ingests the Fama-French factor returns.

Why a series, not a constant

A flat assumption (previously 4%) is correct on average over a stable rate regime but drifts as the front of the yield curve moves. Across EqtyTrk's coverage window the data spans ZIRP (rf near 0%, 2009-2015 and 2020-2022) and the post-2022 hiking cycle (rf near 5%). A constant rf either over- or under-states the cost-of-equity by 300+ basis points in those regimes, which materially shifts WACC, ROIC-WACC spread, and the per-peer (β−1)·rf adjustment in CAPM alpha.

Conventions per call site

Call site	Sampling	Annualization
WACC	Spot rate on period_end (7-day walkback)	rf_daily × 252
etsr_capm	Cumulative compounded over [start, end]	∏(1 + rf_daily) − 1
Portfolio Sharpe	Mean of daily rf over lookback window	mean(rf_daily) × 252

The conventions differ because the math differs. WACC values a single point in time. etsr_capm measures CAPM alpha as cumulative excess return, where exact compounding beats annualization-then-power-formula. Sharpe annualizes numerator and denominator with the same ×252 constant.

Fallback

If the FF table has no coverage for a requested date or window, the helper falls back to the configured risk_free_annual_rate (default 4%). This is the silent-degrade path for fresh environments before the daily FF refresh has run.

Known limitation

FF publishes the 1-month T-bill yield, not the 3-month yield more commonly cited in CAPM textbooks. The two diverge by single-digit basis points in normal regimes and 20-30 bps in periods of curve stress (e.g., March 2020, March 2023). For research-note purposes this is well within the noise of TSR measurement itself. If a precision-critical use case ever emerges, EqtyTrk's architecture supports swapping in the FRED DGS3MO series behind the same helper interface.