FIN 5550 Investment Project: Beta, Return Analysis of S&P 500 Stocks

This finance project involves a beta and return analysis of twenty stocks from the S&P 500 index, focusing on replicating Yahoo Finance's beta calculation method. The project entails downloading historical stock and index price data from Yahoo Finance, understanding the difference between adjusted and real-time closing prices, and discerning Yahoo's beta calculation methodology. The calculated betas are then compared with Yahoo's reported betas, and the discrepancies are analyzed, considering factors such as data period and calculation assumptions. The analysis utilizes regression results, intercept, and R-squared values to assess the risk and return characteristics of the selected stocks relative to the market proxy (S&P 500 index). The project ultimately aims to enhance students' ability to collect financial data, estimate beta from historical data, and interpret regression results in the context of investment analysis. Access more solved assignments and past papers on Desklib.

Running head: VALUING INVESTMENTS
Valuing Investments
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

1VALUING INVESTMENTS
Table of Contents
2a. Indicating how exactly yahoo uses to calculate the beta, while indicating the months returns
that is used by yahoo and determining whether we used the same data period for analysis:..........2
2b. Indicating whether we should use adjusting close price or close price for the calculation:......2
2c. Explaining about market proxy, while determining the ticker used for market proxy:.............3
3. Creating a table for the presentation:...........................................................................................3
4. Indicating whether the regression results match yahoo results:..................................................7
Reference and Bibliography:...........................................................................................................9

2VALUING INVESTMENTS
2a. Indicating how exactly yahoo uses to calculate the beta, while indicating the months
returns that is used by yahoo and determining whether we used the same data period for
analysis:
The calculation of beta is conducted by using the slope function of excel, where the
returns of the stock and the market index is used for deriving the overall value. The total months
that has been used for the calculation purpose is 36 months, as yahoo uses the monthly returns
for deriving the calculation of beta (Investexcel.net, 2015). The confirmation of the data period
cannot be suggested, as we are taking the current data from January 2019 to Jaunty 2016 for the
calculation purpose, whereas there is no information regarding the time period that is current
being used by the yahoo.com.
2b. Indicating whether we should use adjusting close price or close price for the
calculation:
The closing price is mainly used for the calculation purposes, as per the yahoo method, as
the adjusted prices does not provide the accurate level of pricing of the stock. The close price of
the stock over the period provides the relevant information regarding the price action of the
stock, which is not depicted by the adjusted closing price. Therefore, using the adjusted closing
price in the calculation will not provide adequate information about the current risk or beta of the
stock. The calculation of beta that is conducted by yahoo.com uses closing price instead of the
adjusted closing price (Furukawa et al., 2018).

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2c. Explaining about market proxy, while determining the ticker used for market proxy:
Market proxy is a broad representation of the overall stock market, which serves as the
basis for the index fund that is used for statistical calculations. The market proxy is mainly used
for the calculation of beta, as it helps in determining the risk attributes of the stock in comparison
to the market index. The market proxy is used for the calculating the overall beta of the stock,
which allows the investors to make adequate investment decisions. The market proxy, which is
used for the calculation purpose is S&P 500 index, as it is the best-known market proxy for the
U.S stock market. The researchers mainly use the S&P 500 index for statistical calculations to
derive adequate results for the market behavior patterns (Hawkins, 2017).
3. Creating a table for the presentation:
Ticker IPGP
Company
Name IPG Photonics Corporation
Yahoo beta 1.79
Calculated beta 1.69
Intercept 0.0033892
R Square 0.2492130
Ticker IRM
Company Name Iron Mountain Incorporated
Yahoo beta 0.98
Calculated beta 0.96
Intercept 0.0011507
R Square 0.2143746
Ticker JBHT
Company Name J.B. Hunt Transport Services, Inc
Yahoo beta 1.23

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Calculated beta 1.28
Intercept 0.0003553
R Square 0.3934213
Ticker JKHY
Company Name Jack Henry & Associates, Inc
Yahoo beta 1.04
Calculated beta 1.01
Intercept 0.0053604
R Square 0.3872960
Ticker JEC
Company Name Jacobs Engineering Group Inc
Yahoo beta 1.36
Calculated beta 1.27
Intercept 0.0042650
R Square 0.3037713
Ticker JCI
Company Name Johnson Controls International plc
Yahoo beta 1.27
Calculated beta 1.41
Intercept -0.0131037
R Square 0.4164107
Ticker JNJ
Company
Name Johnson & Johnson
Yahoo beta 0.65
Calculated beta 0.64
Intercept 0.0014135
R Square 0.2364605
Ticker JPM
Company JPMorgan Chase & Co

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Name
Yahoo beta 1.07
Calculated beta 1.04
Intercept 0.0067653
R Square 0.3676555
Ticker JNPR
Company
Name Juniper Networks, Inc
Yahoo beta 0.2
Calculated beta 0.17
Intercept 0.0024205
R Square 0.0098403
Ticker KSU
Company
Name Kansas City Southern
Yahoo beta 1.01
Calculated beta 0.92
Intercept 0.0040042
R Square 0.2332420
Ticker K
Company
Name Kellogg Company
Yahoo beta 0.71
Calculated beta 0.68
Intercept -0.0116993
R Square 0.2338024
Ticker KEY
Company Name KeyCorp
Yahoo beta 1.43
Calculated beta 1.42
Intercept 0.0001368
R Square 0.3223439

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Ticker KEYS
Company Name Keysight Technologies, Inc
Yahoo beta 1.01
Calculated beta 0.99
Intercept 0.0251726
R Square 0.2060982
Ticker KMB
Company
Name Kimberly-Clark Corporation
Yahoo beta 0.44
Calculated beta 0.43
Intercept -0.0069434
R Square 0.0784266
Ticker KIM
Company Name Kimco Realty Corporation
Yahoo beta 0.78
Calculated beta 0.82
Intercept -0.0187574
R Square 0.1555062
Ticker KMI
Company Name Kinder Morgan, Inc
Yahoo beta 0.97
Calculated beta 1.03
Intercept -0.0051949
R Square 0.2415441
Ticker KLAC
Company Name KLA-Tencor Corporation
Yahoo beta 1.33
Calculated beta 1.37
Intercept 0.0023993
R Square 0.3382864

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Ticker KSS
Company
Name Kohl's Corporation
Yahoo beta 0.64
Calculated beta 0.65
Intercept 0.0068998
R Square 0.0502798
Ticker KHC
Company Name The Kraft Heinz Company
Yahoo beta 0.97
Calculated beta 0.88
Intercept -0.0201005
R Square 0.2162460
Ticker KR
Company
Name The Kroger Co
Yahoo beta 0.73
Calculated beta 0.60
Intercept -0.0108862
R Square 0.0492145
4. Indicating whether the regression results match yahoo results:
After analyzing the regression results with the yahoo results it could be identified that
both the outcomes do not match. There are different reasons behind the dissimilarity between the
outcomes of both yahoo and the calculated regression value. This is the main reason behind the
difference in the calculated beta in comparison to the yahoo beta. The difference between both
the values are relevantly low, where the results differ only in some basis points. This mainly
indicates that the assumptions of the yahoo beta and calculated beta is relevantly different
(Cherchiglia et al., 2016). The time fame of the calculation is relevantly similar, whereas the

8VALUING INVESTMENTS
actual data used for the calculation purpose can be different in nature. This directly indicates that
the 36 months is used for calculation, while the time frame from January, 2019 to January, 2016
is not been used by yahoo for calculating the beta.

9VALUING INVESTMENTS
Reference and Bibliography:
Cherchiglia, A. L., Sampaio, M., Hiller, B., & Scarpelli, A. B. (2016). Subtleties in the beta-
function calculation of $$$$ supersymmetric gauge theories. The European Physical
Journal C, 76(2), 47.
Finance.yahoo.com. (2019). Finance.yahoo.com. Retrieved 17 February 2019, from
https://finance.yahoo.com/
Furukawa, M., Watanabe, T., Morrison, P. J., & Ichiguchi, K. (2018). Calculation of large-
aspect-ratio tokamak and toroidally-averaged stellarator equilibria of high-beta reduced
magnetohydrodynamics via simulated annealing. Physics of Plasmas, 25(8), 082506.
Hawkins, R. B. (2017). Effect of heterogeneous radio sensitivity on the survival, alpha beta ratio
and biologic effective dose calculation of irradiated mammalian cell populations. Clinical
and translational radiation oncology, 4, 32-38.
Investexcel.net. (2015). How does Yahoo Finance Calculate Beta?. Invest Excel. Retrieved 17
February 2019, from http://investexcel.net/how-does-yahoo-finance-calculate-beta/