I need to calculate beta of the company's stock?
eg: returns for co. are -5%, 5%, 8%, 15% and 10% over 5 years. the returns for stock exchange are -12%, 1%, 6% 10% and 5% for the same 5 years.
How to compute the beta of the company's stock?
* 5 years ago
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Best Answer - Chosen by Asker
Bete is measure of Risk.
Year 1 Beta = -5/12 = 0.42
Year 2 Beta = 5/1 = 5
Year 3 Beta = 8/6 = 1.33
Year 4 Beta =10/10 = 1
Year 5 Beta = 10/5 = 2
Overall Beta for five Year = -5+5+8+15+10/(-12+1+6+10+5)
It means , when Index moves @ 1% the Company Share will move by 3.3%
The more the Bete , the more the Risk. also Return.
So be carefull in investing in Companies having high Beta.
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