Question

Below are the returns for the past seven years for common stock for the Nucor Corporation and for the overall stock market. Year Nucor Stock Market. IM 2012 8.9% - 10.0% 2013 -14.7% 2.5% 2014 16.5% 5.2% 2015 21.3% 11.6% 2016 17.4% 7.3% 2017 9.2% 3.0% 2018 29.1% 12.7% What is the estimated beta of the Nucor stock? Hint: You can use either a cakulator or Excel to answer this question

Answer 1

Beta = Covariance_N,m / variance_m

where Covariance_N,m is the covariance of returns between Nucor and the stock market,

and variance_m is the variance of market returns.

Covariance is calculated using COVAR function in Excel.

Variance is calculated using VAR function in Excel.

Beta is 0.82.

fxB9/B10 B11 D Nucor Market 1 Year -10.00% 8.90% 2 2012 -14.70% 2.50% 2013 16.50% 5.20% 2014 21.30% 11.60% 5 2015 17.40% 7.30% 6 2016 9.20% 3.00% 7 2017 29.10% 12.70% 2018 9 Covariance 0.004666 10 Variance 0.005706 11 Beta 0.82 n

A. В C Nucor Market 1 Year 2 2012 0.089 -0.1 3 2013 -0.147 0.025 4 2014 0.165 0.052 5 2015 0.213 0.116 6 2016 0.174 0.073 7 2017 0.092 0.03 8 2018 0.291 0.127 COVAR(B2:B8, C2:C8) 9 Covariance =VAR(C2:C8) -B9/B10 10 Variance 11 Beta