Projects: Beta computation
Prof. P.V. Viswanath

Download stock price data from http://chart.yahoo.com/d/ for IBM (ticker symbol IBM) for the period December 1978 to December 1983 in a spreadsheet format. Use the last column of the data (titled Adj. Close) to compute monthly returns. Download index data for the S&P 500 from Economagic for the same period. Use regression to compute the beta for IBM (in Excel). Now use data for the period December 1993 to December 1998 to compute IBM's beta again. Then look up the beta number provided for IBM on Yahoo. Answer the following questions:

  1. Show the results of your regression and interpret the coefficients.
  2. How confident are you regarding your beta estimate? (Answer this question with respect to the beta that you computed using the 1993-1998 data.
  3. Can you think of ways to improve your beta estimate (for the 1993-1998 period)?
  4. Is your beta estimate for the 1993-1998 period different from the beta number provided by Yahoo? Why?
  5. Is your beta estimate for the 1978-1983 period different from the estimate for the 1993-1998 period? Explain any differences.
  6. What do you infer about IBM from your results?

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