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Beta-Formula-Excel-Template

This document contains information about calculating beta from historical asset and benchmark price data, as well as formulas and examples for calculating beta using correlation, standard deviation, risk-free rates, and portfolio weights. Beta is a measure of the volatility or systematic risk of a security or portfolio in comparison to the market as a whole. It is used to determine the expected return of an asset given its risk profile. The document provides step-by-step calculations and explanations of how to derive beta from various inputs.

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kapil garg
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0% found this document useful (0 votes)
136 views9 pages

Beta-Formula-Excel-Template

This document contains information about calculating beta from historical asset and benchmark price data, as well as formulas and examples for calculating beta using correlation, standard deviation, risk-free rates, and portfolio weights. Beta is a measure of the volatility or systematic risk of a security or portfolio in comparison to the market as a whole. It is used to determine the expected return of an asset given its risk profile. The document provides step-by-step calculations and explanations of how to derive beta from various inputs.

Uploaded by

kapil garg
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Beta Excel Template

Visit: www.educba.com
Email: [email protected]
Benchmark Percentage of Percentage of Change
Date Assets Price
Price Change in Asset in Benchmark

1-Jan-18 232 1274 0.92 0.15


1-Feb-18 446 1460 -0.34 -0.24
1-Mar-18 294 1110 0.09 0.24
1-Apr-18 321 1376 1.27 -0.04
1-Jun-18 730 1316 -0.11 -0.01
1-Jul-18 648 1300 0.08 0.04
1-Aug-18 703 1351 0.04 0.03
1-Sep-18 728 1396 -0.05 0.03
1-Oct-18 689 1440 -0.68 -0.2
1-Nov-18 220 1148 1.71 0.09
1-Dec-18 597 1247 -1 -1

Variance is Calculated as:


Variance 0.6653
0.66534727272727
Covariance is Calculated as:
Covariance 0.16440

Beta is Calculated as:


Beta = Covariance (Re, Rm) / Variance (Rm)

Beta 0.2471
Suppose an investor wants to invest in a company, he wants to calculate Beta
of the company and compare it with S&P 500 EFT Trust correlation between
two is 0.62, the standard deviation of returns of the company is 22% and standard
deviation of returns of S&P is 30%.

Correlation between company and S&P 500 0.62


Standard deviation of returns of company 22%
Standard deviation of returns of S&P 30%

Beta Using correlation formula is calculated as:


Beta = Correlation(Ra – Rm) *( σe / σm)

Beta 0.45
A company gave risk free return of 5%, the stock rate of return is 10%
and the market rate of return is 12% now we will calculate Beta for same.

Risk Free Return 5%


Stock's Rate of Return 10%
Market's Rate of return 12%

Return on risk taken on stocks is calculated


Return on risk taken on stocks = Stock Rate of Return – Risk Free Return

Return on risk taken on stocks 5%


Kj = Krf + b
where:
Kj = required rate
Return on risk taken on market 7%
Bj = Beta for the j

Beta 0.71
Return on risk taken on Market is calculated using below formula
Return on risk taken on Market = Market Rate of Return – Risk Free Return

Beta is Calculated using below formula


Beta = Return on risk taken on stocks/ Return on risk taken on Market

Kj = Krf + bj ( Km – Krf )

required rate of return on the jth security


Beta for the jth security
An investor has a portfolio of $100,000, the market value of HCL is $40,000
with a Beta value of HCL is 1.20, and market value of Facebook is $60,000
with Beta value is 1.50. The beta of the portfolio will be:-

Portfolio Value $ 100,000.00


Portfolio bet
Beta value of HCL $ 40,000.00 Beta of a portfolio is the
Market value of HCL 1.2
Beta value of Facebook $ 60,000.00
Market value of Facebook 1.5

Weight of HCL is calculated as:


Weight of HCL 0.4

Weight of Facebook is calculated as:


Weight of Facebook 0.6

Beta of Portfolio is calculated as:


Beta of Portfolio 1.38
Portfolio beta = S wi x bi
Beta of a portfolio is the weighted average beta of individual securities in the portfolio.

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