Question
The table below shows the annual returns from the U.S. stock market (RM) and from company...
The table below shows the annual returns from the U.S. stock market (RM) and from company XYZ's stocks (RXYZ) in the past seven years.
| Year | RM | RXYZ |
| 2010 | 15% | 12% |
| 2011 | 2% | 55% |
| 2012 | 16% | 4% |
| 2013 | 32% | 6% |
| 2014 | 14% | 9% |
| 2015 | 1% | -13% |
| 2016 | 12% | 61% |
What is the market risk, measure as beta, of Company XYZ?
Note: Use a financial calculator to find beta. Do not use the rise-over-run approach. Keep 4 decimal places. For example, if your answer is beta = -0.1234, enter "-0.1234".
Answers
Beta is calculated by the formula Covariance(rxyz,rrm)/Variance rrm
By using a financial calculator beta is given by b and the ans is -0.6832
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