Given the following returns on Stock Q and "the market" during the last three years, what is the difference in the calculated beta coefficient of Stock Q when Year 1 and Year 2 data are used as compared to Year 2 and Year 3 data? (Hint: Think rise over run.)

Question

Quizplus · Accepted Answer

The beta coefficient is calculated as the covariance of the stock's returns with the market's returns divided by the variance of the market's returns. The difference in beta when using Year 1 and Year 2 data versus Year 2 and Year 3 data is 9.17.

Given the Following Returns on Stock Q and "The Market