BETA EQUATION

beta equation: translation

( security)

The market beta of a security is determined as follows: regress excess returns of stock y on excess returns of the market. The slope coefficient is beta. Define n as number of observation numbers. Beta= [( n) (sum of [xy]) ]-[ (sum of x) (sum of y)]/ [( n) (sum of [xx]) ]-[ (sum of x) (sum of x)] where: n = \# of observations (usually 36 to 60 months) x = rate of return for the S&P 500 index y = rate of return for the security. Bloomberg Financial Dictionary

Related: alpha