Question

calculate stock beta for the following:

1. GE

2. Intel

3. Chevron

4. Apple

5. Comment on your findings

Returns S&P 500 Returns GE Returns Intel Returns CVX Returns AAPLI 4.05% 1.74% 0.85% 8.79% -3.66% 9.15% 5.28% 2.75% 0.58%) -3.32% 3.29%! -4.83% -1.42% 6.48% 12.34% 1.979 -6.26% -0.93% -4.18% 8.28% -8.47% -1.88%) 8.34% 8.30%) 0.05% 1.75% 15.70% 3.53% 0.48% 10.64% 7.52%) 0.67% 13.33%i 13.99%) 6.53% -3.68%! -5.88% 0.14% 9.97% -9.96% 10.29% 15.78% -1.69% 4.13% -0.33% 0.32% 4.33% 4.89% 3.56% 6.28% 2.95% 5. 98% -7.63% 1.81%) 7.13% 0.43%) -2.66% 5.33% 4.77%! 1.85% 3.40% 1.78% 2.73% 5.31% 5.32% 1.52% -1.68% 0.35% 0.22% 1.82% 6.56% 5.40% 12.89% 0.76% 2.72% 5.32%) 3.65% -0.62% 0.91% 0.48% 1.93% 0.05% 1.35% -3.58% 1.85% 4.66% -5.33% -1.13% 10.27%" 5.66% 10.28% 2.22% 0.37% 3.43% 5.62% 3.899 -15.79% -9.28% 19.46% -1.43% 3.55% -1,17%) -6.06% -12.74% 6.38%) -5.42% -10.71% 6.38% 4.38% 0.07% 6.94% -9.43% -0.65% 13.08%" -0.56% 2.80%) 19.62% -0.48%) 0.48% 0.43% -12.75% -1.76% 4.21% 1.79%) -9. 1896| -25.74% -18.40%) 0.93%| -4.2396| -7.6496| -11.36%

Answer 1

Beta is a measure of the volatility (or riskiness) of a stock with respect to it's benchmark. Beta of 1 indicates that the stock moves in line with the benchmark index. Beta less than 1 indicates low risk while beta greater than 1 indicates higher risk with respect to the benchmark index.

For this question since the stock returns were given along with the benchmark (S&P 500) returns, I have calculated the beta for each of the four individual stocks viz. GE, Intel, Chevron and Apple using SLOPE function in Microsoft Excel.

While using the SLOPE function first select the full range of values under stock returns followed by the full range of values under S&P 500 returns. Eg.: =SLOPE(known_y's,known_x's) where y represents stock returns and x represents benchmark returns in the same period.

By using the above method we get,

1. Beta of GE = 0.62

2. Beta of Intel = 0.78

3. Beta of Chevron = 1.04

4. Beta of Apple = 1.14

5. Based on our findings, we can say that GE and Intel have less volatility than S&P 500 while Chevron and Apple are higher volatility than S&P 500. GE has the least risk while Apple has the highest risk.

Note: Volatility (or risk) exist on both upside and downside of the benchmark.