Question

Market betas are typically computed with five years of monthly data or two years of weekly data. For computational simplicity, we present only 12 data points in Exhibit 13.13 for ConglomCo, a large conglomerate firm. Using a spreadsheet regression package or other software tool, compute a regression beta for ConglomCo.EXHIBIT 13.13 ConglomCo and Market Returns ConglomCo Market 1.3 1.0 2.0 5.0 3.4 (1.0) (1.4) 0.3 (0.6) 3.7 2.2 Month 1 Month 2

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Answer #1

Solution: Using the spreadsheet regression in excel to compute a regression beta for ConglomCo.

Goto the Data tab in excel
Open the Data Analysis toolpack
Slect Regression
Enter ConglomCo return data as dependent variable in the field: INPUT Y RANGE
Enter Market return data as independent variable in the field: INPUT X RANGE
Click OK to run the regression

In the SUMMARY OUTPUT the COEFFICIENT OF X VARIABLE is BETA for ConglomCo. = 0.928803906.

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