One of my foreign clients is asking me about the beta index for various U.S. companies within our industry. I don't have a clue how to figure it and can't find anything on Ameritrade. Can anyone tell me how to figure it without too much difficulty or where to find it for specific companies? Thanks.

 

go to yahoo! finance.
find the quote.
look in the left column under company and click on the second link "key statistics"

you'll find your beta there.

btw, the beta for amtd is 1.92.

 

Thanks a million!

 

Any idea what Yahoo! uses for the "market" against which the beta is computed, or what period of time is used for the return history?

 

Should say somewhere in the fine print. Typically it'll be against the S&P 500 or the like. Unfortunately, on some sites it can be very difficult to find out exactly I've noticed.

 

Betas are calculated by plotting an index return (usually the S&P 500) vs an individual stocks return. You simply download the previous prices into excel and calculate the the slope of the companies returns relative to the S&P 500 returns.

What data should you use? Daily data often has a lot of noise and therefore isn't used. Most analysts use weekly returns of two to three years, or monthly returns for three to five years.

 

Alternatively, beta is calculated as the covariance of the company's returns and the market's returns divided by the variance of the market's returns, or the correlation of the company's returns and the market's returns times the company's relative volatility of returns (the company's standard deviation of returns divided by the market's standard deviation of returns). Either way, it's equivalent to the slope of the regression line of the company's returns (y-axis) vs. the market's returns (x-axis).

The question wasn't what data should be used, nor what data most analysts use. The question was, specifically, what data does Yahoo! use?

 

^
The SLOPE function in excel gives the same output as the equation COVAR(company returns,S&P returns) / VARP(S&P returns).

I only included what data should be used in my previous post because the original poster asked how to figure out beta.

With regard to yahoo, an article in the stock section says they use 5 years of monthly returns.

 

Very cool. I wasn't aware of the SLOPE function.

Formula, not equation.

Thanks!

 

ramu ramanathan is that you?!