Compute the beta for Company X using the monthly stock returns for the past thre

Question

Compute the beta for Company X using the monthly stock returns for the past three years along with the markets's returns.

Date Compnay Xs Monthly Return Market's Monthly Return 2012/11/30 -0.012413 0.006193 2012/12/31 -0.090738 0.012531 2013/01/31 -0.144094 0.054093 2013/02/28 -0.025116 0.008331 2013/03/28 0.002855 0.035274 2013/04/30 0.000271 0.014945 2013/05/31 0.022596 0.019066 2013/06/28 -0.118303 -0.015039 2013/07/31 0.141225 0.052681 2013/08/30 0.083389 -0.025714 2013/09/30 -0.021481 0.037477 2013/10/31 0.096386 0.039851 2013/11/29 0.069673 0.024947 2013/12/31 0.008902 0.026126 2014/01/31 -0.107697 -0.029957 2014/02/28 0.057311 0.046173 2014/03/31 0.019953 0.004469 2014/04/30 0.099396 0.00166 2014/05/30 0.078293 0.020218 2014/06/30 0.027662 0.027941 2014/07/31 0.028731 -0.020524 2014/08/29 0.077092 0.040171 2014/09/30 -0.017073 -0.025129 2014/10/31 0.07196 0.021176 2014/11/28 0.105556 0.02115 2014/12/31 -0.071891 -0.003616 2015/01/30 0.061424 -0.027152 2015/02/27 0.100461 0.055948 2015/03/31 -0.031372 -0.010439 2015/04/30 0.005786 0.008722 2015/05/29 0.045146 0.010323 2015/06/30 -0.037266 -0.019258 2015/07/31 -0.032888 0.012095 2015/08/31 -0.066117 -0.059993 2015/09/30 -0.021816 -0.033735 2015/10/30 0.083409 0.07396

Explanation / Answer

Using excel function,

Covariance of monthly return and market return = 0.000814 (COVAR)

Variance of market return = 0.000889 (VAR)

Beta = Covariance of monthly and market return/ Variance of market return

Beta = 0.000814/0.000889

Beta = 0.9158

Hence, the beta of stock X is 0.9158.

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.