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Question: The Capital Asset Pricing Model postulates a relationship between the returns to a particular stock and the return on the market. Go to the Internet and obtain monthly stock price data for Microsoft, GE, IBM, Procter & Gamble, and the S&P 500:

a. Calculate the slope coefficient from a regression of the firms' return data on the S&P 500-that is, the "beta" for each company.

b. Which firm's stock is the most sensitive to changes in the market?

c. Would you expect the "beta" for a firm to be stable (i.e., unchanging over time)? Why or why not?

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Statistics and Probability, Statistics

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