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Question
You are given the following returns on "the market" and Stock F during the last three years. We could calculate beta using data for Years 1 and 2 and then, after Year 3, calculate a new beta for Years 2 and 3. How different are those two betas, i.e., what's the value of beta 2 - beta 1? (Hint: You can find betas using the Rise-Over-Run method, or using your calculator's regression function.)
Year Market Stock F
1 6.10% 6.50%
2 12.90% -3.70%
3 16.20% 21.71%
a. 7.89
b. 8.30
c. 8.74
d. 9.20
e. 9.66
Answer
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