DO IT ON EXCEL:

Using Microsoft and S&P 500 monthly returns (1986-2006) provided on the next sheet,

(1) Estimate Microsoft's beta using linear regressino over the periods 1987-1991, 1992-1996, 1997-2001, and 2002-2006.

(2) Compare the four estimated betas. What do you conclude about how Microsoft's exposure to systematic risk has changed over time? What do you think explains the change?

	Microsoft	S&P 500
Jan-87	51.134%	13.045%
Feb-87	4.527%	3.522%
Mar-87	25.589%	2.415%
Apr-87	7.054%	-1.328%
May-87	10.437%	0.487%
Jun-87	-11.977%	4.570%
Jul-87	-8.303%	4.606%
Aug-87	25.860%	3.261%
Sep-87	11.129%	-2.642%
Oct-87	-25.506%	-22.136%
Nov-87	-10.400%	-8.591%
Dec-87	20.839%	7.217%
Jan-88	2.475%	3.916%
Feb-88	6.042%	4.201%
Mar-88	-5.282%	-3.529%
Apr-88	-4.000%	0.646%
May-88	5.912%	0.355%
Jun-88	15.027%	4.081%
Jul-88	-11.704%	-0.892%
Aug-88	-16.556%	-3.995%
Sep-88	3.880%	3.633%
Oct-88	-6.830%	2.213%
Nov-88	-4.141%	-1.995%
Dec-88	12.068%	1.114%
Jan-89	11.422%	6.760%
Feb-89	-0.820%	-3.090%
Mar-89	-16.846%	1.650%
Apr-89	11.360%	4.535%
May-89	7.487%	3.256%
Jun-89	-13.107%	-1.277%
Jul-89	2.602%	8.329%
Aug-89	6.566%	1.215%
Sep-89	15.946%	-1.056%
Oct-89	18.663%	-3.002%
Nov-89	5.732%	1.349%
Dec-89	-0.610%	1.792%
Jan-90	5.752%	-7.284%
Feb-90	6.187%	0.729%
Mar-90	11.512%	1.998%
Apr-90	4.050%	-3.185%
May-90	25.182%	9.069%
Jun-90	3.480%	-1.304%
Jul-90	-13.180%	-0.999%
Aug-90	-8.179%	-9.699%
Sep-90	1.839%	-5.467%
Oct-90	0.510%	-1.106%
Nov-90	12.763%	5.894%
Dec-90	3.552%	2.187%
Jan-91	29.879%	3.834%
Feb-91	5.252%	6.671%
Mar-91	1.849%	1.981%
Apr-91	-7.244%	-0.293%
May-91	10.389%	3.844%
Jun-91	-7.311%	-5.001%
Jul-91	7.400%	4.171%
Aug-91	15.526%	1.907%
Sep-91	3.939%	-2.131%
Oct-91	5.058%	0.925%
Nov-91	3.205%	-4.419%
Dec-91	14.016%	11.057%
Jan-92	7.750%	-2.204%
Feb-92	2.423%	1.015%
Mar-92	-4.389%	-2.285%
Apr-92	-7.282%	2.615%
May-92	9.471%	0.210%
Jun-92	-13.543%	-1.807%
Jul-92	3.619%	3.775%
Aug-92	2.145%	-2.307%
Sep-92	7.794%	0.915%
Oct-92	10.018%	0.116%
Nov-92	4.700%	3.175%
Dec-92	-8.602%	0.947%
Jan-93	1.088%	0.606%
Feb-93	-3.833%	1.143%
Mar-93	10.695%	1.860%
Apr-93	-7.808%	-2.657%
May-93	8.113%	2.455%
Jun-93	-5.243%	0.043%
Jul-93	-16.149%	-0.642%
Aug-93	1.270%	3.544%
Sep-93	9.557%	-1.027%
Oct-93	-3.099%	1.848%
Nov-93	-0.406%	-1.203%
Dec-93	0.551%	0.979%
Jan-94	5.331%	3.150%
Feb-94	-3.294%	-2.924%
Mar-94	2.457%	-4.630%
Apr-94	8.875%	1.012%
May-94	15.896%	1.321%
Jun-94	-4.263%	-2.761%
Jul-94	-0.522%	3.004%
Aug-94	12.494%	3.730%
Sep-94	-3.811%	-2.815%
Oct-94	11.869%	1.867%
Nov-94	-0.568%	-4.013%
Dec-94	-3.223%	1.044%
Jan-95	-3.283%	2.173%
Feb-95	5.705%	3.497%
Mar-95	12.437%	2.491%
Apr-95	14.498%	2.505%
May-95	3.053%	3.457%
Jun-95	6.246%	1.853%
Jul-95	-0.312%	2.866%
Aug-95	1.740%	-0.219%
Sep-95	-2.592%	3.790%
Oct-95	10.027%	-0.827%
Nov-95	-13.295%	3.970%
Dec-95	0.227%	1.436%
Jan-96	4.983%	2.974%
Feb-96	6.299%	0.537%
Mar-96	4.107%	0.573%
Apr-96	9.358%	1.014%
May-96	4.437%	2.159%
Jun-96	0.758%	-0.019%
Jul-96	-2.323%	-4.868%
Aug-96	3.514%	1.699%
Sep-96	7.213%	5.188%
Oct-96	3.656%	2.338%
Nov-96	13.889%	7.149%
Dec-96	4.879%	-2.441%
Jan-97	22.999%	5.797%
Feb-97	-4.802%	0.394%
Mar-97	-6.392%	-4.539%
Apr-97	32.085%	5.540%
May-97	1.568%	5.598%
Jun-97	1.545%	4.110%
Jul-97	11.538%	7.527%
Aug-97	-6.991%	-6.012%
Sep-97	-0.345%	5.037%
Oct-97	-2.168%	-3.760%
Nov-97	8.456%	4.239%
Dec-97	-9.137%	1.237%
Jan-98	14.996%	0.676%
Feb-98	13.225%	6.823%
Mar-98	5.215%	4.731%
Apr-98	0.268%	0.576%
May-98	-6.295%	-2.119%
Jun-98	27.372%	3.652%
Jul-98	1.042%	-1.465%
Aug-98	-13.165%	-14.888%
Sep-98	14.263%	5.946%
Oct-98	-4.125%	7.814%
Nov-98	14.920%	5.751%
Dec-98	13.298%	5.383%
Jan-99	25.833%	3.832%
Feb-99	-14.564%	-3.458%
Mar-99	18.970%	3.571%
Apr-99	-9.645%	3.503%
May-99	-1.109%	-2.701%
Jun-99	11.374%	5.150%
Jul-99	-5.231%	-3.502%
Aug-99	7.476%	-0.885%
Sep-99	-2.551%	-3.131%
Oct-99	1.818%	5.938%
Nov-99	-1.997%	1.673%
Dec-99	27.791%	5.450%
Jan-00	-16.577%	-5.434%
Feb-00	-9.115%	-2.323%
Mar-00	18.411%	9.313%
Apr-00	-34.813%	-3.469%
May-00	-10.805%	-2.552%
Jun-00	27.472%	2.065%
Jul-00	-13.214%	-2.043%
Aug-00	-0.500%	5.711%
Sep-00	-14.118%	-5.789%
Oct-00	13.637%	-0.983%
Nov-00	-17.207%	-8.394%
Dec-00	-24.901%	-0.011%
Jan-01	40.238%	3.008%
Feb-01	-3.768%	-9.508%
Mar-01	-7.749%	-6.775%
Apr-01	23.496%	7.381%
May-01	1.791%	0.350%
Jun-01	5.242%	-2.714%
Jul-01	-9.629%	-1.284%
Aug-01	-14.119%	-6.570%
Sep-01	-10.587%	-8.355%
Oct-01	13.421%	1.687%
Nov-01	10.251%	7.501%
Dec-01	3.027%	0.726%
Jan-02	-3.974%	-1.599%
Feb-02	-8.559%	-2.059%
Mar-02	3.247%	3.633%
Apr-02	-13.498%	-6.215%
May-02	-2.723%	-0.877%
Jun-02	7.315%	-7.254%
Jul-02	-12.435%	-7.944%
Aug-02	2.153%	0.517%
Sep-02	-11.020%	-11.008%
Oct-02	22.105%	8.662%
Nov-02	7.754%	5.766%
Dec-02	-10.478%	-5.985%
Jan-03	-8.301%	-2.720%
Feb-03	0.121%	-1.590%
Mar-03	2.052%	0.871%
Apr-03	5.476%	8.137%
May-03	-3.807%	5.179%
Jun-03	4.085%	1.176%
Jul-03	2.933%	1.693%
Aug-03	0.347%	1.880%
Sep-03	4.747%	-1.142%
Oct-03	-5.466%	5.587%
Nov-03	-1.715%	0.810%
Dec-03	6.377%	5.164%
Jan-04	0.953%	1.766%
Feb-04	-4.111%	1.330%
Mar-04	-6.121%	-1.599%
Apr-04	4.733%	-1.650%
May-04	0.323%	1.312%
Jun-04	8.803%	1.865%
Jul-04	-0.345%	-3.410%
Aug-04	-4.006%	0.295%
Sep-04	1.172%	0.973%
Oct-04	1.047%	1.418%
Nov-04	6.714%	3.896%
Dec-04	-0.496%	3.243%
Jan-05	-1.807%	-2.598%
Feb-05	-4.117%	1.945%
Mar-05	-4.145%	-1.981%
Apr-05	4.465%	-2.106%
May-05	2.052%	2.942%
Jun-05	-3.951%	-0.088%
Jul-05	2.860%	3.479%
Aug-05	6.924%	-1.212%
Sep-05	-6.316%	0.520%
Oct-05	-0.387%	-1.937%
Nov-05	7.706%	3.472%
Dec-05	-5.847%	-0.286%
Jan-06	7.298%	2.298%
Feb-06	-4.567%	-0.069%
Mar-06	0.895%	0.875%
Apr-06	-11.606%	0.982%
May-06	-6.269%	-3.308%
Jun-06	2.470%	-0.265%
Jul-06	2.862%	0.217%
Aug-06	6.770%	1.960%
Sep-06	6.010%	2.167%
Oct-06	4.563%	2.848%
Nov-06	2.192%	1.482%
Dec-06	1.303%	1.003%