What does Beta measure and how is it interpreted? Explain the beta values of TSLA and JPM by providing a calculated example of how they relate to market returns.
What does Beta measure and how is it interpreted? Explain the beta values of TSLA and JPM by providing a calculated example of how they relate to market returns.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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- The Beta coefficients of TSLA and JPM are 1.99 and 1.18 respectively. What does Beta measure and how is it interpreted? Explain the beta values of TSLA and JPM by providing a calculated example of how they relate to market returns.
Transcribed Image Text:TABLE 1 (below) includes end of year price data on the NASDAQ, Tesla (TSLA) and JP
Morgan (JPM) from years 2011 to 2021:
TABLE 1: (Source:
https://au.finance.yahoo.com)
Tesla,
Inc.
(TSLA)
Year
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
NASDA
Q
Index
2657.39
3091.33
4160.03
4760.24
4897.65
5425.62
6937.65
6506.91
9039.46
12958.52
16356.00
5.79
7.00
37.20
29.96
44.57
42.97
62.40
61.22
84.90
719.46
1147.75
JPMorgan
Chase
& Co. (JPM)
E(R)
Risk
34.06
44.98
NASDAQ TSLA
Returns Return JPM
S
-
16.33%
20.90%
58.31 34.57% 431.43%
62.18 14.43% -19.46%
63.95
2.89%
48.77%
87.34 10.78% -3.59%
107.63 27.87%
45.22%
95.95
-6.21%
-1.89%
139.79
38.92%
38.68%
127.50
43.36% 747.42%
159.86
26.22%
59.53%
20.92%
136.70%
16.05% 251.26%
Returns
32.06%
29.64%
6.64%
2.85%
36.58%
23.23%
-10.85
45.69%
-8.79%
25.38%
18.24%
19.54%
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