finance and statistics peeps

[spentagn]

How would I do the following:

Calculate the beta for each market capitalization category and for the portfolio overall as the weighted average beta, using each stock's purchase market values as your weights.

Assume I have a given portfolio, know the returns, beginning and ending prices, blah blah blah.

 

[prophet]

http://www.willowsolutions.com/tips/tips_2002_03.shtml


see if that helps

 

[Lumberg]

How would I do the following:

Calculate the beta for each market capitalization category and for the portfolio overall as the weighted average beta, using each stock's purchase market values as your weights.

Assume I have a given portfolio, know the returns, beginning and ending prices, blah blah blah.

This is a pretty elementary exercise in finance. It's a little involved to explain in a post. I'm sure there are examples in your textbook.

With all due respect, why not ask a TA, your professor, or a fellow student? I do know how to do this but to explain it over the internet is kind of stupid when you have those resources available to you where you are.

JC

 

[slickdadd]

find the market returns, compare each individual category against the market, in a slope form (if the market return is 10 percent, and the category's is 12, then 12/10 is your beta). Then calculate the proporitons of the indivual categories to the portfolio overall (the amount each category contributes to the overall portfolio), multiply those proportions to the individual betas, then add up the total. Or that's how I know.

 

[spentagn]

Re: Re: finance and statistics peeps

This is a pretty elementary exercise in finance. It's a little involved to explain in a post. I'm sure there are examples in your textbook.

elementary yet involved. ok. My class doesn't follow the text book.

With all due respect, why not ask a TA, your professor, or a fellow student? I do know how to do this but to explain it over the internet is kind of stupid when you have those resources available to you where you are.

JC

With all due respect, do you think I've tried those options? Don't have a TA, can't reach the prof, and due to recent system changes, I can't mass email the class. In the amount of time it took for you to be condescending, you could've easily explained it, oh finance guru.

 

[Lumberg]

OK let me put it this way. Even though your class doesn't follow the book exactly every basic book about finance will have it in there somewhere.

Like slick said beta is the relative volatility of a stock (relative to what you say? most use the S&P 500 as a benchmark). Basically if the market goes up 10% and the stock goes down 10%, it has a beta of -1 (very rare).

Now if you have a whole series of prices you are going to need a financial calculator or excel to figure out the beta. It is a simple regression equation. Note that some betas are meaningless; say the market goes up 5% one month, down 1% the next, and up 3% the next. A particular stock or segment goes down 1% in the first month, down 1% in the second month, and up .5% the next. The two movements are practically random but the formula will give you a number for beta even though there is very little correlation.

If you just have two prices (at beginning of the period and end of period). Then you just calculate the relative changes.

Anyways once you get the betas for the individual segments of your portfolio just do a weighted average. I'm sure you know how to do that.

While you're at it do you have any philosophy or Calculus homework? I'm bored.



JC

 

[spentagn]

I was given all the relevant info, it was just presented in a manner I didn't recognize. The prof went over it today in class for the first time.

While you're at it do you have any philosophy or Calculus homework? I'm bored.



JC

No, I passed those long ago. On a side note, I have a test on Friday, the last day of classes. It's worth 40% of the final grade. University rules don't allow anything to count for more than 30% the final week. So guess what senior went and talked to the dean of the classics dept for a freshman level class to resolve this problem today? Poor guy has more bullshit work on his desk, and then I walk in refusing to allow my prof to do this to me, nevermind the fact I haven't been to the class in 3 weeks due to illness and vacation.