Understanding statistical measures of risk is fundamental to understanding investing. In particular, a stock's CAPM beta coefficient (?) and R2 value are two important risk measures. Beta measures the degree to which stock and benchmark returns move together, while the coefficient of determination, or R2, represents the strength of the relationship between the stock and the benchmark. The Beta Visualization application provides a rich graphical interface to help visualize and interpret the relationship between the CAPM beta coefficient and R2.

Access the Beta Visualization platform and answer the following questions:

BETA VISUALIZATION PLATFORM:

1.  Information Technology industry
a. locate the highest and lowest beta stocks in the Information Technology industry
b. find the corresponding R2 values for the highest and lowest beta stock.
 

2. Which industries have the highest and lowest average industry beta?
 

3. Which industry has an average industry beta closest to the market beta?

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Ticker Company AA AAPL ABT AMZN CAT CCE EXC GE JNJ MSFT PCG STT T VZ XOM ALCOA INC APPLE INC ABBOTT LABORATORIES AMAZON.COM INC CITIGROUP INC CATERPILLAR INC COCA-COLA ENTERPRISES INC EXELON CORP GENERAL ELECTRIC CO JOHNSON & JOHNSON MICROSOFT CORP PG&E CORP STATE STREET CORP AT&T INC VERIZON COMMUNICATIONS INC EXXON MOBIL CORP Alpha -0.801% 0.026% 0.047% 1.276% -0.045% -0.623% 0.275% -0.370% 0.366% 0.007% 0.317% 0.326% -0.155% 0.004% -0.106% -0.307% Beta 1.46 1.41 0.88 0.86 1.13 1.44 0.65 0.53 1.11 0.70 1.39 0.33 1.35 0.68 0.82 1.23 R 32.78% 54.74% 50.06% 14.01% 53.76% 59.11% 22.21% 12.15% 45.03% 55.46% 47.51% 5.90% 61.58% 39.39% 43.89% 56.76% Idiosyncratic Volatility 4.13% 2.54% 1.74% 4.23% 2.07% 2.36% 2.39% 2.80% 2.42% 1.24% 2.89% 2.63% 2.10% 1.68% 1.82% 2.11% Total Volatility 5.04% 3.77% 2.46% 4.56% 3.05% 3.70% 2.71% 2.99% 3.26% 1.85% 3.98% 2.71% 3.39% 2.15% 2.43% 3.22% Ticker Company AA AAPL ABT AMZN CAT CCE EXC GE JNJ MSFT PCG STT T VZ XOM ALCOA INC APPLE INC ABBOTT LABORATORIES AMAZON.COM INC CITIGROUP INC CATERPILLAR INC COCA-COLA ENTERPRISES INC EXELON CORP GENERAL ELECTRIC CO JOHNSON & JOHNSON MICROSOFT CORP PG&E CORP STATE STREET CORP AT&T INC VERIZON COMMUNICATIONS INC EXXON MOBIL CORP Alpha -0.801% 0.026% 0.047% 1.276% -0.045% -0.623% 0.275% -0.370% 0.366% 0.007% 0.317% 0.326% -0.155% 0.004% -0.106% -0.307% Beta 1.46 1.41 0.88 0.86 1.13 1.44 0.65 0.53 1.11 0.70 1.39 0.33 1.35 0.68 0.82 1.23 R 32.78% 54.74% 50.06% 14.01% 53.76% 59.11% 22.21% 12.15% 45.03% 55.46% 47.51% 5.90% 61.58% 39.39% 43.89% 56.76% Idiosyncratic Volatility 4.13% 2.54% 1.74% 4.23% 2.07% 2.36% 2.39% 2.80% 2.42% 1.24% 2.89% 2.63% 2.10% 1.68% 1.82% 2.11% Total Volatility 5.04% 3.77% 2.46% 4.56% 3.05% 3.70% 2.71% 2.99% 3.26% 1.85% 3.98% 2.71% 3.39% 2.15% 2.43% 3.22% Ticker Company AA AAPL ABT AMZN CAT CCE EXC GE JNJ MSFT PCG STT T VZ XOM ALCOA INC APPLE INC ABBOTT LABORATORIES AMAZON.COM INC CITIGROUP INC CATERPILLAR INC COCA-COLA ENTERPRISES INC EXELON CORP GENERAL ELECTRIC CO JOHNSON & JOHNSON MICROSOFT CORP PG&E CORP STATE STREET CORP AT&T INC VERIZON COMMUNICATIONS INC EXXON MOBIL CORP Alpha -0.801% 0.026% 0.047% 1.276% -0.045% -0.623% 0.275% -0.370% 0.366% 0.007% 0.317% 0.326% -0.155% 0.004% -0.106% -0.307% Beta 1.46 1.41 0.88 0.86 1.13 1.44 0.65 0.53 1.11 0.70 1.39 0.33 1.35 0.68 0.82 1.23 R 32.78% 54.74% 50.06% 14.01% 53.76% 59.11% 22.21% 12.15% 45.03% 55.46% 47.51% 5.90% 61.58% 39.39% 43.89% 56.76% Idiosyncratic Volatility 4.13% 2.54% 1.74% 4.23% 2.07% 2.36% 2.39% 2.80% 2.42% 1.24% 2.89% 2.63% 2.10% 1.68% 1.82% 2.11% Total Volatility 5.04% 3.77% 2.46% 4.56% 3.05% 3.70% 2.71% 2.99% 3.26% 1.85% 3.98% 2.71% 3.39% 2.15% 2.43% 3.22%

Answer rating: 100% (QA)

To answer the questions I will use the provided data in the Beta Visualiza... View the full answer