Question

What might be a reason that the Beta of a stock is different depending on your...

What might be a reason that the Beta of a stock is different depending on your method of obtaining it? In other words, why might it be 1.27 when you look on Yahoo but you calculate it to be .98?

A.

A different proxy for the market is used by the different sources
B.

Beta is a subjective measure
C.

A different method of calculating rreturns is used by the different sources
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Answer #1

Beta or systematic risk is obtained when the stock returns are regressed against the market returns. The market is assumed to be a proxy for the market as a whole. This proxy can vary for one analyst from another. For example, S&P 500 can be used as proxy by one analyst while another could chooses Dow Jones or Nasdaq. This could give rise to different Beta values for the stock.

Answer is

A.

A different proxy for the market is used by the different sources
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