Calculate Beta based on imported stock price

3 approaches to calculate beta

Before going into the following three approaches, it is necessary to calculate the return rate based on stock prices:

Return rate=Stock price (t+1)/Stock price (t)-1

 

Approach 1: Beta= Covariance (ri,rm )/Variance of Market

The covariance of the return of an asset and the return of the benchmark divided by the variance of the return of the benchmark over a certain period.

1 

 

Approach 2: Beta= Correlation(ra,rm)* S.D(i)/ S.D(m)

2

Functions used in Excel:

“CORREL” =Correlation

“STDEV” =Standard deviation 

 

Approach 3: Slope function in Excel

SLOPE(known_y’s, known_x’s) 

Y-axis refers to Market Index, e.g. S&P 500

X-axis refers to targeted company, e.g. Amazon

 

BETA-CAPM1

Source: http://www.investopedia.com/ask/answers/070615/what-formula-calculating-beta.asp

 

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