a) Get the last 5 years of monthly stock returns for this firm.
Choose at least 2 market indices (example S&P 500 and NASDAQ)
Calculate the monthly market returns
Now use the equation for calculating β – that is, the ratio of stock covariance with the market divided by the market variance to calculate two βs – one for each market index chosen
b) Repeat part (a) – but with 1 year of weekly returns
c) Calculate the β by performing regression analysis with 5 years of monthly stock returns – using the two market indices in turn
d) Find the β from a published source – such as Yahoo! Finance or Value Line
e) Now that you have seven different βs for this one stock* – say which one is the most appropriate. Be sure to reflect on the choice of market index, the length of time for observation, the methodology and most importantly, the current level of risk (business and financial) faced by the industry as well as the firm being analyzed.
* 7 βS are as follows: In part (a) 5 year monthly returns + S&P 500 and 5 year monthly returns + NASDAQ ; in part (b) 1 year weekly returns + S&P 500 and 1 year weekly returns + NASDAQ; in part (c) 5 year monthly returns regressed against S&P500 + 5 year monthly returns regressed on NASDAQ; in part (d) – a published β from a reliable sour
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