Beta Calculation

There are two methods of calculating intercept (alpha, a) and beta (b) of the
characteristic line for a firm’s equity share. The direct method is to calculate
covariance and variances. The Excel has a function, “Covariance”, under its
Data Analysis that can be used to get the covariance matrix. The alternative
method of estimating beta and intercept is the regression method. The Excel’s
“Regression” function under its Data Analysis can be used.
The next sheet gives closing share prices for Company J and Sensex.
We calculted log rate of return for one period. Calculate the market and
company returns for the remaining periods and calculate beta using
"Regression". Go to Tools>Data Analysis>Regression. When the dilogue box
opens, fill in company returns range in 'Input Y range" and Sensex returns
range in "Input X range'. Click Newsheet in the output box.

Note: To get Data Analysis function: Go to Tools>Add-Ins>Tick Analysis ToolPak

 Co. J Sensex
Period Cl. Price Cl. Price
Dec-00 536.95 3972.12 RJ RM
Jan-01 648.35 4326.72 0.189 0.086
Feb-01 622.65 4247.04
Mar-01 368.7 3604.38
Apr-01 377.15 3519.16
May-01 392.8 3631.91
Jun-01 293.15 3456.78
Jul-01 247.05 3329.28
Aug-01 222.45 3244.95
Sep-01 129.85 2811.6
Oct-01 164.3 2989.35
Nov-01 231.45 3287.56
Dec-01 274.3 3262.33
Jan-02 245.35 3311.03
Feb-02 261.4 3562.31
Mar-02 253.65 3469.35
Apr-02 242.65 3338.16
May-02 221.65 3125.73
Jun-02 224 3244.7
Jul-02 187.7 2987.65
Aug-02 203.55 3181.23
Sep-02 208.7 2991.36
Oct-02 163.15 2949.32
Nov-02 191.25 3228.82
Dec-02 186.6 3377.28
Jan-03 162.3 3250.38
Feb-03 175.3 3283.66
Mar-03 151.55 3048.72
Apr-03 135.15 2959.79
May-03 123.4 3180.75
Jun-03 154.55 3607.13
Jul-03 162.45 3792.61
Aug-03 183.65 4244.73
Sep-03 172.1 4453.24
Oct-03 216.5 4906.87
Nov-03 269.5 5044.82
Dec-03 306.4 5838.96
Jan-04 304.3 5695.67
Feb-04 291.95 5667.51
Mar-04 247.85 5590.6
Apr-04 275.1 5655.09
Average 247.3475