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How to calculate beta in practice? For example, how does Yahoo! Finance (or Google Finance) get...

How to calculate beta in practice? For example, how does Yahoo! Finance (or Google Finance) get beta values for publicly-traded firms?

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Answer #1

Beta is generally calculated in reality by checking the data of previous 2 to 3 years for this publicly traded stocks because this publicly traded from don't have a high stability in their volatility for a longer period of time and they keep on changing according to the market needs.

Generally Yahoo finance or Google finance will be calculating beta based upon 36 months value of these share prices.

The final price on the first trading day of previous month is needed, along with the first price which will be the first trading day of month 36 months prior to the previous months, will also be needed.

Then the calculation of monthly return for the stock is done and calculated using the slope.

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