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  3. in method 1 of the capm handout, the beta of a sto

In Method 1 of the CAPM handout, the beta of a stock can be calculated...

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Accounting

In Method 1 of the CAPM handout, the beta of a stock can be calculated as the slope of the linear regression between the returns of the stock and the returns of the market index (we proxy for that using the S&P 500 index). Calculate the beta for each stock using the returns. You can do this easily one of several ways as is shown in the video. If you do a scatterplot graph, you can ask Excel to include the trend line equation in the graph. The beta will be the slope in the equation. Or, easier, you can select a cell for the slope and type the formula =slope(stockreturns,S&P500returns). This will give you the slope where stockreturns is the column of numbers for the stock of interest and S&P500returns is the column for the index. Dont mix up the ordering in the slope formula, otherwise your beta will be inverted. Or, you can calculate beta using a regression. I do not care which method you use. Match the asset with the beta.

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