Discussion

Go to https://finance.yahoo.com

Search for “GE” (Disclaimer: I own GE)

Its “Beta” is listed as 1.08 (September 26, 2017)

Click on “Historical Data”, use “Time Period: 9/26/2007 to 9/26/2017”, and “Frequency: Monthly”, then click “Apply”

Click “Download Data”

Delete Columns “B:Open”, “C:High”, “D:Low”, “F:Adj Close”, and “G:Volume”, so you only keep “A:Date” and “E:Close” (which is now the “B” column)

Calculate the monthly return for GE in Column C: (End Value – Beginning Value)/Beginning Value

Now search for the appropriate benchmark, which in this case is “^DJI” (Down Jones Industrial Average). Please note: When you do this you have to decide on what the appropriate benchmark is and you have to list it in the discussion posting: This is a very important aspect, as I will discuss in this weeks’ Synchronous Session, and open for debate).

Click on “Historical Data”, use “Time Period: 9/26/2007 to 9/26/2017”, and “Frequency: Monthly”, then click “Apply”

Click “Download Data”

Delete Columns “B:Open”, “C:High”, “D:Low”, “F:Adj Close”, and “G:Volume”, so you only keep “A:Date” and “E:Close” (which is now the “B” column)

Now move Column B from the second file to the first file, so you have four columns in that file: “A:Date”,“B:Close (GE)”,“C:Monthly Return (GE)”,“D:Close (^DJI)”. Now calculate the monthly return for the DJIA in Column E: (End Value – Beginning Value)/Beginning Value

· See the attached file (I deleted the 9/01/07 row, since it was “null”)

Now calculate Beta which is the SLOPE function in cell A123 “=SLOPE(C2:C121,E2:E121)”

As you can see the Beta for GE for this 10-year time period against the DJI as a benchmark is 1.63, so much riskier than the Beta listed in Finance.Yahoo. I will discuss this in this weeks’ Synchronous Session. I suggest that you play with time periods and benchmarks to see the impact.