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 If a student started out with 2.5021g of crude product, what will be the % yield... asked 9 minutes ago Find the pH of a solution made by mixing 55 mL 1.376 x 10^-4 M potassium... asked 21 minutes ago The market supply of lettuce in a small town is shown in the table below. Supply... asked 35 minutes ago 2. Recall from Homeworks 1 and 2, Daviglus and colleagues also reported the follow-up time in... asked 39 minutes ago why police have a high suicide rate within their profession asked 49 minutes ago If a PlayStation 4 Pro costs 40,000 yen in Japan, how much will it cost in... asked 59 minutes ago The sun (and the earth with it) are traveling at 2.00×104 km/s toward a star that... asked 1 hour ago What supergroup classification are squid in? What supergroup classification are crayfish in? asked 1 hour ago Choose the most correct statement about the kinetic energy of electrons ejected by a metal exhibiting... asked 1 hour ago A random sample of 25 values is drawn from a mound-shaped and symmetric distribution. The sample... asked 2 hours ago Lab 6: Electrophilic Addition Reactions: Bromination of cis- and trans-stilbene My product was cis-stilbene, 1,2-dibromo-1,2-diphenylethane 1.... asked 2 hours ago A parallel-plate capacitor is made from two aluminum foil sheets, each 3.6 cm long and 5.4... 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