Question 1. Estimation of CAPM Beta and Market Risk
AAA, Inc. has the following % returns on its stock, relative to the listed changes in the % return on the market portfolio (S&P 500 or SPY).
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Month Market Return % AAA Return %
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1 +1 +1.9 2 +1 +3.5 3 +1 -0.4 4 -1 -2.5 5 -1 +0.1
6 -1 -3.8
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Question: Derive the Beta of AAA, Inc based on the information provided above.
Hint: Review Class #6 – Part 1, including the example of “Turbo Charged Seafood” in Sections 2.3-2.5.