Ash
β is defined as the covariance between the returns of the particular stock and the benchmark could be the S&P 500 or the Dow. Excel has a covariance function all you have to do is supply the data.
It measures the relationship between the particular stock and the benchmark i.e. when the market moves say 10% how much can you expect the stock to move.
Hope this helps
Jim
Jim S.
tutor
First you have to find out if the beta you are trying to compare is based on daily weekly,monthly,,,,returns and how many data points are used in the calculation. Both the frequency and the length of the sample will determine the result.
So you have to do some digging on Yahoo finance to find out the basis.
Why do you want to do the calculations yourself? I find it more informative to take say five years of daily returns for the stock and the Dow and construct a scatter plot of stock returns (y-axis) vs market returns (x-axis). This provides a good picture of how closely the stock follows the market.
Jim
Report
06/22/15
Ash O.
06/22/15