How to solve this question:

The total risk of Stock Y is 0.2, the total risk of the index is .18. The covariance of returns between the stock and index is .27, what is the stock’s beta?

The total risk of Stock Y is 0.2, the total risk of the index is .18. The covariance of returns between the stock and index is .27, what is the stock’s beta?

Jul 17 2012 06:28 PM

Stock beta= Covariance/ Variance of index.

=(.27/.18*.18)

= answer.

Note that the Covariance value should be .027. And answer will come as 0.83333

Also total risk means standard deviation.

Jul 21 2012 09:45 PM
=(.27/.18*.18)

= answer.

Note that the Covariance value should be .027. And answer will come as 0.83333

Also total risk means standard deviation.