Professional Documents
Culture Documents
Problems on Alpha and Beta
Problems on Alpha and Beta
Date
Mahindra Auto (Y)
Index(X)
597.80
40,179.00 904.95
570.80
40,544.00 874.25
40,909.00 582.95
874.25
559.85
41,275.00 847.95
554.60
41,640.00 849.10
545.10
42,005.00 835.80
519.15
42,370.00 816.75
560.70
42,736.00 843.55
835.55 560.95
43,101.00
839.50 597.40
43,466.00
Then using the formal below, the beta and alpha co-efficient
To calculate the beta, the returns have to be calculated.
can be calculated.
nEXY-(EX)(EY)
nEX²-(EX)
a=Y-BX
Mahindra Auto y2 XY
Index Return X
Stock Return Y
-4.52 20.4 15.32
-3.39 11.50873
2.13 4.53
0 11.92
9.049826 -3.96 15.7
-3.01 0.88 -0.13
0.018393 -0.94
0.14 -1.71 2.93 2.68
-1.57 2.453497 10.85
-4.76 22.66
-2.28 5.194996 26.26
8 64.06
3.28 10.76692 0 -0.04
0.04
-0.95 0.899411 42.22 3.07
0.223485 6.5
0.47 0.78 173.39 69.94
40.11526
-7.31
nEXY-(2X)(EY)
n2X?-(EX)
629.46-(-5.694)_ 635.154 = 2.06
x69.94 -(-7.30)(0.78) 361.035-(53.29) 304.745
9x40.115-(-7.30)
a=ø-BX
0.78
=0.087
9
7.30
==-0.81
9
return? and
the
Sun
company
Return
Scrip
(R) SCrip's
0.60 0.50 0.70 0.30 0.60 0.50 0.40 0.60 0.30 return
tor
a
particular
period
Calculations:
= 0.6
4.5 = 0.5
n 9
R-R=BRm-Rm)
R 0.5 =0.75 (-0.6)
= 0.05 + 0.75 R..
The beta value is 0.75 m =
0.05 + 0.75(2) = 1.55
Company Scrip value would be R, = 0, + BR.
the Sun
(a) If the Beta value is 2,
LALDDORLEMS
Illustration 3.30
The return on market and on the security of XYZ Ltd.. are aiven
below. Calculate the Beta of security of X Ltd.,
Month Return on Market(%) Return on XYZ Ltd. (%)
8 7
January
February 12 14
March 6 9
April 11 16
May 14 11
June 12 10
July 13 9
August 9 16
September 7 13
October 6 6
November 12 7
December 10 14
Basic Financial Concepts 104
Solution 3.30
Month (x) (X-x) (x-x )? (y) (y-y) (x-x)(y- y)
8 -2 4 7 -4 8
January
12 +2 4 14 +3 6
February 8
6 -4 16 9 -2
March 5
11 +1 16 +5
April 14 +4 16 11 0 0
May 4 10 -1 -2
June 12 +2
13 +3 9 9 -2 -6
July 1 16 +5 -5
August 9 -1
-3 9 13 +2 -6
September 7
-4 16 6 -5 +201
October 6
+2 4 7 -4 -8
November 12
December 10 0 14 +3
84 132 +20
120
X= 2x 120 =10 V= 2 132 11
n 12 yn 12
B= Z(x-x)(yy) 84 = 0.238
20
Z(x-x)
Alnha factor
ustration3.35
return on securities of Fancy Dresses Ltd., along with the
The given below. Calculate the Beta and Alpha of the
market return is
and
Company'ssecurities. Interpret the Beta and Alpha values
Fancy Dress
Market
Year Return Stock Return
(%) (%)
14 14
1. 2
2. 13 13
3. 14
15
4. 10
12
5. 15
15
6. [MU-B.Com-Nov/Dec 2009]
Solution 3.35
(x-x )2 (y) (y-13) (X-x)\y-y)
Year (x) (x-13) 1 1
1 1 14
1 14 12 -1 4
-4 16
2 9 13
13 +1 2
3 4 14
4 15 2 -3 3
1 10
12 -1 4
5 4 15 2
6 15 2 78 14
78 26
78 = 13
2y 18
X= Ex78
6
=13 y= n 6
n
B=
E(x- %)(y-y) 14
26
=0.54
a =y-B(x)
=13-0.54 (13)
=13-7.02 = 5.98
where x = market return or price
individual stock
y= return of
B=Beta factor
54).