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Beta Calculatio

This document provides information on calculating beta using a graphical method. It shows annual returns for two mutual funds, VFINX and AIVSX, from 1990 to 1995. The slope of the line of best fit on a scatter plot of the funds' returns gives a beta of 0.7868, indicating that AIVSX is less volatile than the overall market as represented by VFINX.

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Muhammad Ahsan Mukhtar
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29 views2 pages

Beta Calculatio

This document provides information on calculating beta using a graphical method. It shows annual returns for two mutual funds, VFINX and AIVSX, from 1990 to 1995. The slope of the line of best fit on a scatter plot of the funds' returns gives a beta of 0.7868, indicating that AIVSX is less volatile than the overall market as represented by VFINX.

Uploaded by

Muhammad Ahsan Mukhtar
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLS, PDF, TXT or read online on Scribd
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VFINX AIVSX

Here's how to calculate the beta. Note that I'm using


1990 -3.32% 0.68% the Vanguard Index 500 Trust mutual fund as the
1991 30.23% 26.53% market proxy.
1992 7.40% 6.99%
1993 9.91% 11.60% Also, note the graphical method gives the same result.
Note that the slope of the characteristic line is the
1994 1.19% 0.15%
fund's beta.
1995 37.43% 30.63%
1996 22.87% 19.35%

Beta 0.7868
Alpha 0.0182

How to Calculate Beta in a Graph


(This graph is called the Characteristic Line)
35.00%
Fund Returns (AIVSX)

30.00%
f(x) = 0.786795331267826 x + 0.0182207430588
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
-10.00% 0.00% 10.00% 20.00% 30.00% 40.0
Market Returns (VFINX)
raph
acteristic Line)

826 x + 0.018220743058859

0.00% 30.00% 40.00%


FINX)

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