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The table lists the monthly total returns on Adobe Systems Inc. common stock and the market...

The table lists the monthly total returns on Adobe Systems Inc. common stock and the market rates of return for a 24-month period. Observation Month Adobe rate of return (%) Market rate of return (%) 1 Aug 2014 3.83 4.18 2 Sep 2014 -3.77 -2.11 3 Oct 2014 1.34 2.74 4 Nov 2014 5.08 2.43 5 Dec 2014 -1.33 -0.01 6 Jan 2015 -3.54 -2.77 7 Feb 2015 12.79 5.78 8 Mar 2015 -6.52 -1.01 9 Apr 2015 2.87 0.42 10 May 2015 3.98 1.39 11 Jun 2015 2.43 -1.70 12 Jul 2015 1.21 1.65 13 Aug 2015 -4.17 -6.00 14 Sep 2015 4.65 -2.95 15 Oct 2015 7.83 7.86 16 Nov 2015 3.16 0.56 17 Dec 2015 2.71 -2.04 18 Jan 2016 -5.12 -5.67 19 Feb 2016 -4.47 -0.02 20 Mar 2016 10.16 7.03 21 Apr 2016 0.45 0.63 22 May 2016 5.57 1.79 23 Jun 2016 -3.70 0.23 24 Jul 2016 2.16 3.97 Estimate beta to two decimal places for Adobe based on this data. Hint: see Examples 16 and 17 in the lecture. 1.73 1.27 1.58 1.04 1.42

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Expert Solution

Solution :-

(X) (M) (Dm) (Dm*Dm) (Dx) (Dx*Dm)
Date Security Return Market Return (M - AvgM) (M - AvgM)^2 ( X - Avg X) (M - AvgM)*(X - Avg X)
1-Aug 3.83 4.18 3.498 12.233 2.263 7.916
2-Sep -3.77 -2.11 -2.793 7.798 -5.337 14.903
3-Oct 1.34 2.74 2.058 4.233 -0.227 -0.466
4-Nov 5.08 2.43 1.748 3.054 3.513 6.139
5-Dec -1.33 -0.01 -0.693 0.480 -2.897 2.006
6-Jan -3.54 -2.77 -3.453 11.920 -5.107 17.631
7-Feb 12.79 5.78 5.098 25.985 11.223 57.211
8-Mar -6.52 -1.01 -1.693 2.865 -8.087 13.687
9-Apr 2.87 0.42 -0.263 0.069 1.303 -0.342
10-May 3.98 1.39 0.708 0.501 2.413 1.707
11-Jun 2.43 -1.70 -2.383 5.676 0.863 -2.057
12-Jul 1.21 1.65 0.968 0.936 -0.357 -0.345
13-Aug -4.17 -6.00 -6.683 44.656 -5.737 38.335
14-Sep 4.65 -2.95 -3.633 13.195 3.083 -11.200
15-Oct 7.83 7.86 7.178 51.517 6.263 44.955
16-Nov 3.16 0.56 -0.123 0.015 1.593 -0.195
17-Dec 2.71 -2.04 -2.723 7.412 1.143 -3.113
18-Jan -5.12 -5.67 -6.353 40.354 -6.687 42.477
19-Feb -4.47 -0.02 -0.703 0.494 -6.037 4.241
20-Mar 10.16 7.03 6.348 40.291 8.593 54.546
21-Apr 0.45 0.63 -0.053 0.003 -1.117 0.059
22-May 5.57 1.79 1.108 1.227 4.003 4.434
23-Jun -3.70 0.23 -0.453 0.205 -5.267 2.383
24-Jul 2.16 3.97 3.288 10.808 0.593 1.950
Average / Sum 1.567 0.6825 285.92245 296.8618
AVG(B4:B27) AVG(C4:C27) SUM(E4:E27) SUM(G4:G27)
Variance of Market = (Sum of Dm*Dm)/n = 285.92/24 11.913
Covariance of Security and Market = (Sum of Dm*Dx)/n = 296.86/24 12.369
Beta = Cov(s.m)/ Var(m) = 12.369/11.913 1.038

If there is any doubt please ask in comments

jeff jeffy answered 5 months ago
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