NETFLIX (i) Estimate the stock beta for a company. Select a publicly traded company (preferably large...

NETFLIX

(i) Estimate the stock beta for a company. Select a publicly traded company (preferably large firms) and download the monthly closing prices for 5 years into Excel. Choose a market index (e.g. S&P 500) and download the monthly closing values for 5 years into Excel. Calculate the monthly returns for the selected company and the market index. Using the regression function in Excel, regress the stock return on the market index return.

(ii) Compare and contrast the stock beta you estimated with two other sources (e.g. Yahoo! Finance, CNBC, etc.).

Expert Solution

Solution

Part A)

Microsoft is selected as a company and 5 year monthly data has been downloaded from yahoo finance source

The return has been calculated using LN function in excel i.e. Return = LN ( this month / previous month )

Regression is performed using Microsoft return as the dependent variable and S&P return as an independent variable.

Value of Beta comes out to be 0.99964 (Given in excel image under variable 1 coefficient )

Part B ) Beta = 1.32 Yahoo finance

Beta = 1.05 CNBC

Beta = 0.999 Our calculation

So our calculated beta is less than the beta taken from these two sources. This may due to their methodology of selecting the data and time period

jeff jeffy answered 2 years ago

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NETFLIX (i) Estimate the stock beta for a company. Select a publicly traded company (preferably large...

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Expert Solution

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