Question
In: Finance
Intro The following table shows rates of return for a mutual fund and the market portfolio...
Intro
The following table shows rates of return for a mutual fund and the market portfolio (S&P 500).
| A | B | C | |
| 1 | Year | Fund | Market |
| 2 | 1 | 14% | 13% |
| 3 | 2 | -24% | -14% |
| 4 | 3 | -6% | -7% |
| 5 | 4 | 5% | 28% |
| 6 | 5 | 14% | 8% |
| 7 | 6 | 16% | 8% |
Attempt 1/3 for 10 pts.
Part 1
Regress the returns on the stock on the returns on the S&P 500. What is the beta of the fund, using the industry model (not subtracting the risk-free rate), i.e., the slope coefficient of the regression?
2+ Decimal Answer
Solutions
Expert Solution
Here the “x” variable is the return rates for the market and “y” variable is the return rates for the mutual fund.
You can compute the beta either by using the “slope” function in excel or using the regression equation.
Both the methods will give you a solution of 0.744144
Thus beta = 0.7441 (4 decimal place) or 0.74 (2 decimal place)
The regression output of excel is give below:
| Coefficients | |
| Intercept | -0.012981982 |
| X Variable 1 | 0.744144 |
Screen shot for regression computation for your reference:
jeff jeffy answered 2 years agoRelated Solutions
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