Spreadsheet Problem As discussed in the text, beta estimates for one firm will vary depending on various factors 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. (LG10-4)

a. Using all 45 monthly returns for Microsoft and the two stock market indexes, compute Microsoft’s beta using the S&P 500 Index as the market proxy. Then compute the beta using the NASDAQ index 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 returns. Compare the estimate to the ones from parts

(a) and (b).

1 Date A 2 Q4 2020 B C MSFT S&P500 6.02% 11.69% 3 Q3 2020 3.60% 8.47% 4 Q2 2020 29.40% 19.95% 5 Q1 2020 0.28% -20.00% 6 Q4 2019 13.81% 8.53% 7 Q3 2019 4.13% 1.19% 8 Q2 2019 14.00% 3.79% 9 Q1 2019 16.61% 13.07% 10 Q4 2018 11 Q3 2018 -10.81% -13.97% 16.43% 7.20% 12 Q2 2018 8.51% 2.93% 13 Q1 2018 7.20% -1.22% 14 Q4 2017 15.41% 6.12% 15 Q3 2017 8.64% 3.96%