I. The Beta of a Stock You want to invest in the stock market but are not sure which stock to purchase. Information is the key to making an informed investment decision. One piece of information that many stock analysts use is the beta of the stock. Go to Wikipedia (http://en.wikipedia.org/wiki/ Beta_%28finance%29) and research what beta measures and what it represents. 1. Approximating the beta of a stock. Choose a well-known company such as Google or Coca-Cola. Go to a website such as Yahoo! Finance (http://finance.yahoo.com/) and find the weekly closing price of the company's stock for the past year. Then find the closing price of the Standard & Poor's 500 (S&P500) for the same time period. To get the historical prices in Yahoo! Finance click the price graph, choose Basic Chart, then scroll down and select Historical Prices. Choose the appropriate time period and select Weekly. Finally, select Download to Spreadsheet. Repeat this for the S&P500, and copy the data into the same spread- sheet. Finally, rearrange the data in chronological order. Be sure to expand the selection to sort all the data. Now, using the adjusted close price, compute the percentage change in P; – P. price for each week using the formula % change : P. For example, if week 1 price is in cell D1 and week 2 price is D2 – D1 in cell D2, then %change S&P500 data. Repeat this for the bị
I. The Beta of a Stock You want to invest in the stock market but are not sure which stock to purchase. Information is the key to making an informed investment decision. One piece of information that many stock analysts use is the beta of the stock. Go to Wikipedia (http://en.wikipedia.org/wiki/ Beta_%28finance%29) and research what beta measures and what it represents. 1. Approximating the beta of a stock. Choose a well-known company such as Google or Coca-Cola. Go to a website such as Yahoo! Finance (http://finance.yahoo.com/) and find the weekly closing price of the company's stock for the past year. Then find the closing price of the Standard & Poor's 500 (S&P500) for the same time period. To get the historical prices in Yahoo! Finance click the price graph, choose Basic Chart, then scroll down and select Historical Prices. Choose the appropriate time period and select Weekly. Finally, select Download to Spreadsheet. Repeat this for the S&P500, and copy the data into the same spread- sheet. Finally, rearrange the data in chronological order. Be sure to expand the selection to sort all the data. Now, using the adjusted close price, compute the percentage change in P; – P. price for each week using the formula % change : P. For example, if week 1 price is in cell D1 and week 2 price is D2 – D1 in cell D2, then %change S&P500 data. Repeat this for the bị
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 12QTD
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Transcribed Image Text:I. The Beta of a Stock You want to invest in the stock market
but are not sure which stock to purchase. Information is the
key to making an informed investment decision. One piece
of information that many stock analysts use is the beta of
the stock. Go to Wikipedia (http:/len.wikipedia.org/wiki/
Beta_%28finance%29) and research what beta measures and
what it represents.
1. Approximating the beta of a stock. Choose a well-known
company such as Google or Coca-Cola. Go to a website
such as Yahoo! Finance (http://finance.yahoo.com/) and
find the weekly closing price of the company's stock for
the past year. Then find the closing price of the Standard &
Poor's 500 (S&P500) for the same time period. To get the
historical prices in Yahoo! Finance click the price graph,
choose Basic Chart, then scroll down and select Historical
Prices. Choose the appropriate time period and select
Weekly. Finally, select Download to Spreadsheet. Repeat
this for the S&P500, and copy the data into the same spread-
sheet. Finally, rearrange the data in chronological order. Be
sure to expand the selection to sort all the data. Now, using
the adjusted close price, compute the percentage change in
P, – P,
price for each week using the formula %change
P.
For example, if week 1 price is in cell D1 and week 2 price is
D2 – D1
in cell D2, then % change
Repeat this for the
D1
S&P500 data.
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