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Look at the companies listed in Table 8.2. Calculate monthly rates of return for two successive five-year periods. Calculate betas for each subperiod using the
Look at the companies listed in Table 8.2. Calculate monthly rates of return for two successive five-year periods. Calculate betas for each subperiod using the Excel SLOPE Function. How stable was each company's beta? Suppose that you had used these betas to estimate expected rates of return from the CAPM. Would your estimates have changed significantly from period to period?
Stock | Beta | Expected Return |
Catepillar | 1.66 | 13.6 |
Dow Chemical | 1.65 | 13.5 |
Ford | 1.44 | 12.1 |
Microsoft | 0.98 | 8.9 |
Apple | 0.91 | 8.4 |
Johnson & Johnson | 0.53 | 5.7 |
Walmart | 0.45 | 5.2 |
Campbell Soup | 0.39 | 4.7 |
Consolidated Edison | 0.17 | 3.2 |
Newmont | 0 | 2.0 |
This is from Principles of Corporate Finance 12th Edition by Brealey, Myers, and Allen.
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