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Beta Equation

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Beta equation (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.
  • Related: Alpha
Beta Equation
A way to calculate beta, which is the measure of a security's volatility relative to that of the wider market. There are several different beta equations.
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In the same context, Breeden (1979) shows that Merton's multi-beta pricing equation can collapse into a single beta equation where the expected excess return on any security, is proportional to its beta, with respect to aggregate consumption alone.
An intertemporal capital asset pricing model under incomplete ... by Bellalah, Mondher; Wu, Zhen / International Journal of Business
 
 
 
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