Question

Calculate Stock Y BETA given that Stock Y prices and the Market Index in the past 6 months are reported as the following: Then, explain the meaning of the Beta that you just calculated.

Months Stock Y prices ($) Market Index

Jan 2020 $ 292 2941

Feb 2020   $ 307 3025

Mar 2020 $ 271 2542

April 2020 $ 254 2941

May 2020 $ 293 3025

June 2020 $ 317 3072

July 2020 $ 365 3074

Answer 1

As question refers to last 6 month data, however we are provided with 7 month data. Therefore answer has been provided for both versions. First computing Beta for 7 month data

Mean computation

Month	Stock Y	Market Index
Jan	292	2941
Feb	307	3025
Mar	271	2542
Apr	254	2941
May	293	3025
Jun	317	3072
Jul	365	3074
Total	2099	20620
Mean ---> Total / no. of months	299.86	2,945.71

Variance of Stock Y

Month	Stock Y	Stock Y Mean	Stock Y Deviation from Mean	Square of deviation from Mean
Jan	292	299.86	(7.86)	61.73
Feb	307	299.86	7.14	51.02
Mar	271	299.86	(28.86)	832.73
Apr	254	299.86	(45.86)	2,102.88
May	293	299.86	(6.86)	47.02
Jun	317	299.86	17.14	293.88
Jul	365	299.86	65.14	4,243.59
Step 1 : Sum of square of deviation from Mean	7,632.86
Step 2 : Step 1/no. of months ---> Variance of Stock Y	1,090.41

Variance of Market Index

Month	Market Index	Market Index Mean	Stock Y Deviation from Mean	Square of deviation from Mean
Jan	2941	2,945.71	(4.71)	22.22
Feb	3025	2,945.71	79.29	6,286.22
Mar	2542	2,945.71	(403.71)	162,985.22
Apr	2941	2,945.71	(4.71)	22.22
May	3025	2,945.71	79.29	6,286.22
Jun	3072	2,945.71	126.29	15,948.08
Jul	3074	2,945.71	128.29	16,457.22
Step 1 : Sum of square of deviation from Mean	208,007.43
Step 2 : Step 1/no. of months ---> Variance of Market Index	29,715.35

Covariance of Stock Y

Month	Stock Y	Market Index	Stock Y Mean	Stock Y Deviation from Mean	Market Index Mean	Market Index Deviation from Mean	Stock Y Deviation from Mean x Market Index Deviation from Mean
Jan	292	2941	299.86	(7.86)	2,945.71	(4.71)	37.04
Feb	307	3025	299.86	7.14	2,945.71	79.29	566.33
Mar	271	2542	299.86	(28.86)	2,945.71	(403.71)	11650.04
Apr	254	2941	299.86	(45.86)	2,945.71	(4.71)	216.18
May	293	3025	299.86	(6.86)	2,945.71	79.29	(543.67)
Jun	317	3072	299.86	17.14	2,945.71	126.29	2,164.90
Jul	365	3074	299.86	65.14	2,945.71	128.29	8,356.90
Step 1 : Sum of (Stock Y Deviation from Mean x Market Index Deviation from Mean)	22,447.71
Step 2 : Step1/no. of months --> Covariance	3,206.82

Beta computation

Beta = Covariance / Variance of Market

Beta = 3206.916 / 29715.35

Beta = 0.11

Now computing Beta with data of last 6 months, i.e., from Feb to Jul 2020

Mean computation

Month	Stock Y	Market Index
Feb	307	3025
Mar	271	2542
Apr	254	2941
May	293	3025
Jun	317	3072
Jul	365	3074
Total	1807	17679
Mean ---> Total / no. of months	301.17	2,946.50

Variance of Stock Y

Month	Stock Y	Stock Y Mean	Stock Y Deviation from Mean	Square of deviation from Mean
Feb	307	299.86	7.14	51.02
Mar	271	299.86	(28.86)	832.73
Apr	254	299.86	(45.86)	2,102.88
May	293	299.86	(6.86)	47.02
Jun	317	299.86	17.14	293.88
Jul	365	299.86	65.14	4,243.59
Step 1 : Sum of square of deviation from Mean	7,571.12
Step 2 : Step 1/no. of months ---> Variance of Stock Y	1,261.85

Variance of Market Index

Month	Market Index	Market Index Mean	Stock Y Deviation from Mean	Square of deviation from Mean
Feb	3025	2,945.71 0 0 Add a comment Know the answer? Your Answer: Post as a guest Your Name: What's your source? Earn Coins Coins can be redeemed for fabulous gifts. Log In Sign Up Post as anonymous Post Your Answer Not the answer you're looking for? Ask your own homework help question Similar Questions A loan made on March 14 is due September 13 of the following year. Find the... A loan made on March 14 is due September 13 of the following year. Find the exact time for the loan in a​ non-leap year and a leap year. days. The exact time in a​ non-leap year is ? days The exact time in a leap year is ? days. Data Table Sequential Numbers for Dates of the Year Day of Month Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. 1 1 32 60 91 121... ADVERTISEMENT Need Online Homework Help? Get Answers For Free Most questions answered within 1 hours. Ask a Question ADVERTISEMENT Active Questions dha asked 12 minutes ago 1- a) What is the only ASTM nut type for galvanized bolts? b) Name the four... asked 32 minutes ago Ajax Ltd. is the lessee under a finance lease with a provision to purchase the leased... asked 49 minutes ago Please convert the following numbers to each of the numbering systems: 0xABC 11011100 Show all work asked 58 minutes ago Find the total mass of the centroid E bounded by the elliptic paraboloids y= 5−4x^2−z^2 and... asked 1 hour ago A stock index consists of businesses in both Europe and the United States. Assume that each... asked 1 hour ago If the density of solid chromium is 7.15 g/cm3, what is the packing efficiency of Cr... asked 1 hour ago “One way to reduce the agency problem is to understand what motivates the agents (managers)”. Discuss... asked 1 hour ago This is my code, but when I try to create my "Qualified" Table it won't let... asked 1 hour ago A ship is designed to sail at 9.26 m/s. A model is tested in a tow... asked 1 hour ago Calculate the pH of each of the solutions and the change in pH to 0.01 pH... asked 2 hours ago I want to know about the Cash ratio. Please elaborate about it. Pl explain with example... asked 2 hours ago About Contact Terms of Use Privacy Policy Academic Honesty Policy Homework Answer Scanner App Report DMCA © 2022 JustAAA   user contributions licensed under cc by-sa 4.0