As discussed in the text, beta estimates for one firm will vary depending on various factors like
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As discussed in the text, beta estimates for one firm will vary depending on various factors like such as the time over which the estimation is conducted, the market portfolio proxy, and the return intervals. You will demonstrate this variation using returns for Microsoft.
a. Using all 45 monthly returns for Microsoft and the two stock market indices, compute Microsoft's beta using the S&P 500 Index as the market proxy. Then compute the beta using the NASDAQ indices as the market portfolio proxy. Compare the two beta estimates.
b. Now estimate the beta using only the most recent 30 monthly returns and the S&P 500 Index. Compare the beta estimate to the estimate in part (a) when using the S&P 500 Index and all 45 monthly returns.
c. Estimate Microsoft's beta using the following quarterly data returns. Compare the estimate to the ones from parts (a) and (b).
PortfolioA portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...
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Related Book For
Finance Applications and Theory
ISBN: 978-0077861681
3rd edition
Authors: Marcia Cornett, Troy Adair
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