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Corporate Finance Assignment-Beta Estimation

This document is a course assignment that estimates beta for four Bangladeshi companies. It defines beta as a measurement of a stock's sensitivity to market movements compared to the overall market. It then provides beta calculations for four companies from different sectors - The City Bank, Apex Footwear, FAS Finance, and Bangladesh Industrial Finance Company Limited. The results show their betas and whether their stock prices tend to be more or less volatile than the market.

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Farhan Shariar
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55 views3 pages

Corporate Finance Assignment-Beta Estimation

This document is a course assignment that estimates beta for four Bangladeshi companies. It defines beta as a measurement of a stock's sensitivity to market movements compared to the overall market. It then provides beta calculations for four companies from different sectors - The City Bank, Apex Footwear, FAS Finance, and Bangladesh Industrial Finance Company Limited. The results show their betas and whether their stock prices tend to be more or less volatile than the market.

Uploaded by

Farhan Shariar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Bangladesh University of Professionals

Course: Corporate Finance

Assignment-1: β estimation for Companies

Prepared For:
Asst. Prof. Md. Yousuf Harun
Jahangirnagar University, Dhaka

Prepared By:
Farhan Shariar Dipto
ID: B1506166
Batch: BBA 2015(FIN SEC B)

Date of Submission: March 12, 2018


What is Beta?
β is a measurement of sensitivity stocks compared to overall markets systematic risk.
Market β is always 1. So stock β >1 indicated stock is more sensitive then market and vice-
versa.

Selected Companies
Company Name Category
The City Bank A
Apex Footwear A
FAS Finance B
BIFC Z

Beta Calculation
Covar x,m
I calculated the β using the following formula: β =
Var m

Here,
x = daily return of the stock
m= daily change of index DSEX.

Results
Company Name Category BETA
The City Bank A 1.22
Apex Footwear A 0.07
FAS Finance B 1.30
Bangladesh Industrial Finance Z -0.28
Company Limited

Explanation:
A beta of 1 means that the price of the stock moves the same way the market does. If the
beta is less than 1 it means the stock prices moves to the same direction of the market but
at lower volatility. In a down market, beta>1 means more volatility and prospect for loss on
the security. In an up market, a beta less than 1 means less profitability for the security.
Here the security would underperform. A positive market direction means the price of the
stock moves to the same direction as the market.
The City Bank
Positive market direction. 22% more volatile than the market.
Apex Footwear
Positive market direction. 93% more volatile than the market.
FAS Finance
Positive market direction. 30% more volatile than the market.
Bangladesh Industrial Finance Company Limited
Negative market direction. 72% less volatile than the market.

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