Question: Re Calculate the variance of the market returns and the co-variance
Re Calculate the variance of the market returns and the co-variance between the returns on the market and those of Anchovy Queen. Notes: 1) Beta is the ratio of the variance to the co-variance. 2) USE the yellow box instead of the Market return in the table.
| (1) | (2) | (3) | (4) | (5) | (6) | (7) |
| Product of | ||||||
| Deviation | Deviation | Squared | Deviations | |||
| From | From average | Deviation | From average | |||
| Market | Anchovy Q | average | Anchovy Q | From average | Returns | |
| Month | Return | Return | Market return | Return | Market return | (cols 4 x 5) |
| 1 | -8% | -11% | -10 | -13 | 100 | 130 |
| 2 | 4 | 8 | 2 | 6 | 4 | 12 |
| 3 | 12 | 19 | 10 | 17 | 100 | 170 |
| 4 | -6 | -13 | -8 | -15 | 64 | 120 |
| 5 | 2 | 3 | 0 | 1 | 0 | 0 |
| 6 | 8 | 6 | 6 | 4 | 36 | 24 |
| Average | 2 | 2 | Total | 304 | 456 | |
| Variance – σm2 – 304/6 – 50.67 | ||||||
| Covariance – σim – 456/6 – 76 | ||||||
| Beta (β) – σim/ σm2 – 76/50.67 – 1.5 | ||||||
| Market
return |
||||||
| 8.5 | ||||||
| 5 | ||||||
| -6 | ||||||
| 3 | ||||||
| 8 | ||||||
| 2 | ||||||
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