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The table lists the monthly total returns on Adobe Systems Inc. common stock and the market...

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Finance

The table lists the monthly total returns on Adobe Systems Inc.common stock and the market rates of return for a 24-month period.Observation Month Adobe rate of return (%) Market rate of return(%) 1 Aug 2014 3.83 4.18 2 Sep 2014 -3.77 -2.11 3 Oct 2014 1.342.74 4 Nov 2014 5.08 2.43 5 Dec 2014 -1.33 -0.01 6 Jan 2015 -3.54-2.77 7 Feb 2015 12.79 5.78 8 Mar 2015 -6.52 -1.01 9 Apr 2015 2.870.42 10 May 2015 3.98 1.39 11 Jun 2015 2.43 -1.70 12 Jul 2015 1.211.65 13 Aug 2015 -4.17 -6.00 14 Sep 2015 4.65 -2.95 15 Oct 20157.83 7.86 16 Nov 2015 3.16 0.56 17 Dec 2015 2.71 -2.04 18 Jan 2016-5.12 -5.67 19 Feb 2016 -4.47 -0.02 20 Mar 2016 10.16 7.03 21 Apr2016 0.45 0.63 22 May 2016 5.57 1.79 23 Jun 2016 -3.70 0.23 24 Jul2016 2.16 3.97 Estimate beta to two decimal places for Adobe basedon this data. Hint: see Examples 16 and 17 in the lecture. 1.731.27 1.58 1.04 1.42

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Solution :-

(X) (M) (Dm) (Dm*Dm) (Dx) (Dx*Dm)
Date Security Return Market Return (M - AvgM) (M - AvgM)^2 ( X - Avg X) (M - AvgM)*(X - Avg X)
1-Aug 3.83 4.18 3.498 12.233 2.263 7.916
2-Sep -3.77 -2.11 -2.793 7.798 -5.337 14.903
3-Oct 1.34 2.74 2.058 4.233 -0.227 -0.466
4-Nov 5.08 2.43 1.748 3.054 3.513 6.139
5-Dec -1.33 -0.01 -0.693 0.480 -2.897 2.006
6-Jan -3.54 -2.77 -3.453 11.920 -5.107 17.631
7-Feb 12.79 5.78 5.098 25.985 11.223 57.211
8-Mar -6.52 -1.01 -1.693 2.865 -8.087 13.687
9-Apr 2.87 0.42 -0.263 0.069 1.303 -0.342
10-May 3.98 1.39 0.708 0.501 2.413 1.707
11-Jun 2.43 -1.70 -2.383 5.676 0.863 -2.057
12-Jul 1.21 1.65 0.968 0.936 -0.357 -0.345
13-Aug -4.17 -6.00 -6.683 44.656 -5.737 38.335
14-Sep 4.65 -2.95 -3.633 13.195 3.083 -11.200
15-Oct 7.83 7.86 7.178 51.517 6.263 44.955
16-Nov 3.16 0.56 -0.123 0.015 1.593 -0.195
17-Dec 2.71 -2.04 -2.723 7.412 1.143 -3.113
18-Jan -5.12 -5.67 -6.353 40.354 -6.687 42.477
19-Feb -4.47 -0.02 -0.703 0.494 -6.037 4.241
20-Mar 10.16 7.03 6.348 40.291 8.593 54.546
21-Apr 0.45 0.63 -0.053 0.003 -1.117 0.059
22-May 5.57 1.79 1.108 1.227 4.003 4.434
23-Jun -3.70 0.23 -0.453 0.205 -5.267 2.383
24-Jul 2.16 3.97 3.288 10.808 0.593 1.950
Average / Sum 1.567 0.6825 285.92245 296.8618
AVG(B4:B27) AVG(C4:C27) SUM(E4:E27) SUM(G4:G27)
Variance of Market = (Sum of Dm*Dm)/n = 285.92/24 11.913
Covariance of Security and Market = (Sum of Dm*Dx)/n = 296.86/24 12.369
Beta = Cov(s.m)/ Var(m) = 12.369/11.913 1.038

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