Question

The table below depict the expected return CCC Berhad and XXX Berhad for April and May: Month Return on FBM KLSE CI Return on CCC Berhad Return on XXX Berhad April 6.25% -2.40% 6.60% May 31.25% 45.60% 13.20%

Month	Return on FBM KLSE CI	Return on CCC Berhad	Return on XXX Berhad
April	6.25%	-2.40%	6.60%
May	31.25%	45.60%	13.20%

 

Calculate the betas for both stocks.

Answer 1

Calculation of Beta of Stock CCC Berhad

Beta = Change in Stock Return / Change in Market Return

Where, Change in Stock Return = Return from CCC Berhad in May - Return from CCC Berhad in April

= 45.60 - ( - 2.40)

= 48

 

Change in Market Return = Return from FBM KLSE CI in May - Return from FBM KLSE CI in April

= 31.25 - 6.25

= 25

 

Beta of Stock CCC Berhad = 48 / 25 = 1.92

 

Calculation of Beta of Stock XXX Berhad

Beta = Change in Stock Return / Change in Market Return

Where, Change in Stock Return = Return from XXX Berhad in May - Return from XXX Berhad in April

= 13.20 - 6.60

= 6.60

 

Change in Market Return = Return from FBM KLSE CI in May - Return from FBM KLSE CI in April

= 31.25 - 6.25

= 25

Beta of Stock XXX Berhad = 6.6 / 25 = 0.264

 

The Beta of:

• Stock CCC Berhad = 1.92
• Stock XXX Berhad = 0.264 or 0.26 (rounded off)

Beta of Stock XXX Berhad = 6.6 / 25 = 0.264