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Use AT&Tas your public trading stock company and estimate its beta using regression method , as follow: First download your stock's data in your Excel:
Use AT&Tas your public trading stock company and estimate its beta usingregression method, as follow:
First download your stock's data in your Excel:
- Download 3 years of monthly price of your stock
- Download 3 years of monthly price of SPY (S&P 500) in the same Excel
- Estimate the monthly returns of your stock & SPY
- Then run a regression in Excel, Y-axis = your stock return and X-axis = SPY return, the slope of this regression is your estimated beta.
- Compare your estimated beta with published betas (For example from Yahoo, Reuter, or Morningstar).
- Using the beta you estimated above, estimate the required rate of return of your chosen stock according to CAPM.
- Estimate the beta of your stock using: bi= (i/M)*iM
WhereiandMare standard deviation of stock i(your stock) andstandard deviation of the Market(SPY) andiMis the correlation of return of stock i with the returns of the market market. So, the risk increases asiandiMincreases.
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