Eugene Bala
Influence of Beta on the Price of Equity and the Cost Capital
Summary
Chapter 1: Introduction
page 2
Chapter 2: Estimating the Cost of Capital
page 4
Chapter 3: Beta Estimates
page 6
Chapter 4: Managerial Implications
page 13
Annexes
SPSS output
page 14
Data Sets
page 22
03/08/16
Page: 1
Eugene Bala
Influence of Beta on the Price of Equity and the Cost Capital
Chapter 1
Introduction
The Dow Jones industrial average, the world's most widely followed indicator of
stock market health, broke through the 10,000 level for the first time on March 17,
1999. Some investors, mostly small-time players, attached great significance to the
development. Ten thousand! That's a lot of zeros, which translates into a lot of wealth.
The real significance of 10,000 is ' that's easy to say and has five digits instead of four'
said financial analysts.
Which investment is more profitable and which is riskier?
A stock's expected
return, its dividend yield plus expected price appreciation, is related to risk. Risk averse
investors must be compensated with higher expected returns for bearing risk. One
source of risk is the financial risk incurred by shareholders in a firm which has debt in
its capital structure. Meeting its financial strategy for a firm is embarking only on
projects that increase shareholder values. Thus, the expected rate of return on these
projects should be equal or greater to the cost of capital.
The company's cost of capital is directly related to its financial leverage and its
impact on the cost of equity. Changes in interest rates, government spending, monetary
policy, oil prices, foreign exchange rates and other macroeconomic factors affect all
companies and the returns on all stock. Risk depends on exposure to macroeconomic
events and can be measured as the sensitivity of a stock's return to fluctuations in
returns on the market portfolio.
Dominant practices in estimating companies' cost of capital are the WACC
method. The CAPM model, which relies on beta estimates and the return on the market
portfolio, is used in order to determine the cost of equity.
Theory dictates that the
return on market portfolio is an unobservable portfolio consisting of all risky assets,
including human capital and other nontraded assets, in proportion to their importance
in world wealth. Beta providers use a variety of stock market indices as proxies for the
03/08/16
Page: 2
Eugene Bala
Influence of Beta on the Price of Equity and the Cost Capital
market portfolio on the argument that stock markets trade claims on a sufficiently wide
array of assets to be adequate surrogates for the unobservable market portfolio.
How beta is estimated and how it impacts the cost of equity, respectively the cost
of capital is critical for managers to understand. In the following sections of this paper it
is presented the relationship between betas and the cost of capital, the regression model
and assumptions allowing to estimate betas as well as two regressions for two different
stocks and a subsequent analysis of the impact of using different indices as return on
the market proxies on the value of the beta.
Included to this document is a diskette containing the data sets that have been
used for statistical analysis.
03/08/16
Page: 3
Eugene Bala
Influence of Beta on the Price of Equity and the Cost Capital
Chapter 2
Estimating the Cost of Capital
The Weighted-Average Cost of Capital
A standard method of expressing a company's cost of capital is the weightedaverage of the cost of individual resources of capital employed (WACC):
WACC = (Wdebt x (1-t)Kdebt) + (Wpreferred x Kpreferred) + (Wequity x Kequity) (1)
where :
K
= component cost of capital
W
= weight of each component as percent of total capital
t
= marginal corporate tax rate
Finance theory offers several important observations when estimating a
company's WACC. First, the capital costs appearing in the equation should be current
costs reflecting current financial market conditions, not historical, sunk costs. In
essence, the costs should equal the investors' anticipated internal rate of return on
future cash flows associated with each form of capital. Second, the weights appearing in
the equation should be market weights, not historical weights based on often arbitrary
out-dated book values. Third, the cost of debt should be after corporate tax, reflecting
the benefits of the tax deductibility of interest.
The Cost of Equity - the Capital Assets Pricing Model
The presence of debt in a firm's capital structure has an impact on the risk borne
by its shareholders. In the absence of debt, shareholders are subjected
only to basic
business or operating risk. This business risk is determined by factors such as the
volatility of a firm's sales and its level of operating leverage. As compensation for
incurring business risk, investors require a premium in excess of the return they could
earn on a riskless security such as a Treasury bill. Thus, in the absence of financial
leverage a stock's expected return can be thought of as the risk-free rate plus a
premium for business risk:
Expected return = Risk-free rate + Risk premium
03/08/16
(2)
Page: 4
Eugene Bala
Influence of Beta on the Price of Equity and the Cost Capital
The risk premium consists of a premium for business risk and a premium for
financial risk. Thus, the relation can be expressed as
Expected return =
Risk-free rate + Business risk premium + Financial risk premium (3)
The capital assets pricing model (CAPM) is an idealised representation of the
manner in which capital markets price securities and thereby determines expected
returns. Since CAPM models the risk/expected return trade-off in the capital markets, it
can be used to determine the impact of financial leverage on expected returns.
In CAPM, systematic (or market-related) risk is the only risk relevant in the
pricing of securities and the determination of expected returns. Systematic risk is
measured by Beta. CAPM provides a measure of a stock's risk premium employing Beta,
which facilitates the estimation of the stock's expected return.
In general the return on the stock, which corresponds to the cost of equity in (1)
and (2) can be expressed as :
Rs = Rf + Beta ( Rm - Rf)
(4)
where :
Rs
= stock's expected return
Rf
= risk free rate
Rm
= return on the market
03/08/16
Page: 5
Eugene Bala
Influence of Beta on the Price of Equity and the Cost Capital
Chapter 3
Beta Estimates: Measuring Market Risk
Regression model
Finance theory calls for a forward-looking beta, one reflecting investors'
uncertainty about the future cash flows to equity. Because forward-looking betas are
unobservable, practitioners are forced to rely on proxies of various kinds. Most often
this involves using beta estimates derived from historical data and published by such
sources as Bloomberg and Standard & Poors.
The usual methodology is to estimate beta as the slope coefficient of the market
model of returns.
The regression equation is:
Rit = Alphai + Betai (Rmt)
(5)
where :
Rit
=
return on stock i in time period (e.g. week, month) t.
This is the dependent variable, as it is predicted by the variation of
the independent variable.
Rmt
=
return on the market portfolio in period t
This is the independent variable as it used to make a prediction on
the dependent variable.
Alphai =
regression constant for stock I (the intercept)
Betai =
beta for stock I (the slope)
Sample size - Practical Compromises
The use of this equation (5) to estimate beta relies on historical data.
The data that has been downloaded from Datastream and subsequently analysed,
represents the return on stock, respectively the return on the market portfolio. The time
span used for estimating the beta is:
1. two year of weekly periods basis (104 paired values) and
2. five year of monthly periods basis (60 paired values)
The names of the companies in each sample are presented in annexes.
03/08/16
Page: 6
Eugene Bala
Influence of Beta on the Price of Equity and the Cost Capital
One Null Hypothethis
The null hypothethis is that there is no relationship between the market return,
reflected by the index used as proxy, and the return on the stock i.
Two regressions
The regression equation (5) implies that the return on stock and the return on
the market portfolio vary together, they are correlated. Some stocks are less affected by
market fluctuations than others are. Investment managers talk about 'defensive' and
'aggressive' stocks. Defensive stocks are not very sensitive to market fluctuations and
their betas are low. In contrast, aggressive stock amplify any market movement and
their betas are high.
To illustrate this relationship, two regressions have been built for :
1. the Walt Disney Company
2. the Unisys Corporation
As proxies for the market have been retained:

The Dow Jones - as the Walt Disney Company is one of the 30 largest
companies (blue chips) listed on the NYSE.

The Standard & Poors 500 index has been retained as proxy for the market
portfolio.
First regression
The SPSS output is presented in Annexe 1 to 4.
For monthly observations of the return on the Walt Disney Company' stock.

The null hypothethis has been rejected as Signif F < 0.05.

The correlation coefficient is .59 if Dow Jones is the independent variable.
The correlation coefficient is .53 if S&P500 is the independent variable.
That indicates a strong correlation between the return on the market and the
return on stock.

Furthermore, the value of Sig T < 0.05 shows that the independent variable,
which is the market return, is significant.

The predictive power of the regression is .35 (Dow Jones), respectively .28 (S&P)

Therefore the regression is considered to be significant.
03/08/16
Page: 7
Eugene Bala
Influence of Beta on the Price of Equity and the Cost Capital
If Dow Jones represents the proxy of the market return then the regression equation is:
Rt = -.086434 + 1.073218 * Rmt
(6)
Beta = 1.07
Exhibit 1 : Normal P-P Plot of DISNEY
1.00
Expected Cum Prob
.75
.50
.25
0.00
0.00
.25
.50
.75
1.00
Observed Cum Prob
and is graphically represented in Exhibit 1. If the S&P 500 represents the proxy
of the market return then the regression equation is :
Rt = -.204710 + 1.022262 * Rmt
(7)
Beta = 1.02
For weekly observations of the return on the Walt Disney Company' stock:

The null hypothethis has been rejected as Signif F < 0.05.

The correlation coefficient is .49 if Dow Jones is the independent variable.
The correlation coefficient is .47 if S&P500 is the independent variable.
That indicates a strong correlation between the return on the market and the
return on stock.

Furthermore, the value of Sig T < 0.05 shows that the independent variable,
which is the market return, is significant.

The predictive power of the regression is .24 (Dow Jones), respectively .22 (S&P)
03/08/16
Page: 8
Eugene Bala

Influence of Beta on the Price of Equity and the Cost Capital
Therefore the regression is considered to be significant.
If Dow Jones represents the proxy of the market return then the regression equation is:
Rt = .130378 + .853764 * Rmt
(8)
Beta = .85
and is graphically represented in Exhibit 2.
Exhibit 2: Normal P-P Plot of DISNEY
1.00
Expected Cum Prob
.75
.50
.25
0.00
0.00
.25
.50
.75
1.00
Observed Cum Prob
If the S&P 500 represents the proxy of the market return then the regression equation
is :
Rt = .030570 + .826095 * Rmt
(9)
Beta = .83
Second regression
The SPSS output is presented in Annexe 5 and 6.
For monthly observations of the return on the Unisys Corporation' stock.

The null hypothethis has been rejected as Signif F < 0.05.

The correlation coefficient is .53 with S&P500 as independent variable.
03/08/16
Page: 9
Eugene Bala
Influence of Beta on the Price of Equity and the Cost Capital
That indicates a strong correlation between the return on the market and the
return on stock.

Furthermore, the value of Sig T < 0.05 shows that the independent variable,
which is the market return, is significant.

The predictive power of the regression is .28 (S&P)

Therefore the regression is considered to be significant.
Exhibit 3: Normal P-P Plot of UNISYS
1.00
.75
Expected Cum Prob
.50
.25
0.00
0.00
.25
.50
.75
1.00
Observed Cum Prob
The regression equation is :
Rt = -1.435103 + 2.381546 * Rmt
(10)
Beta = 2.38
and is graphically represented in Exhibit 3.
For weekly observations of the return on the Unisys Corporation' stock:

The null hypothethis has been rejected as Signif F < 0.05.

The correlation coefficient is .48 with S&P500 as independent variable.
03/08/16
Page: 10
Eugene Bala
Influence of Beta on the Price of Equity and the Cost Capital
That indicates a strong correlation between the return on the market and the
return on stock.

Furthermore, the value of Sig T < 0.05 shows that the independent variable,
which is the market return, is significant.

The predictive power of the regression is .23 (S&P)

Therefore the regression is considered to be significant.
The regression equation is :
Rt = 1.169138 + 1.313846 * Rmt
(11)
Beta = 1.31
and is graphically represented in Exhibit 4.
Exhibit 4:Normal P-P Plot of UNISYS
1.00
.75
Expected Cum Prob
.50
.25
0.00
0.00
.25
.50
.75
1.00
Observed Cum Prob
03/08/16
Page: 11
Eugene Bala
Influence of Beta on the Price of Equity and the Cost Capital
Beta estimates
The different values resulting from the use of different return on the market
proxies (Table 1) indicates that :

When using Dow Jones as return on the market proxy for a company which is in the
Dow Jones' pool the value of beta is above 1, as for an aggressive stock.

When using S&P500 as return on the market proxy for a company which is in the
Dow Jones' pool the value of beta is under 1, as for a defensive stock.
As a result, it is possible to assess the variability of the return on the stock by
comparing with a larger population of companies by using the S&P 500. In this case
the Walt Disney Company seems to be a defensive stock when compared to the
overall market. When compared to its specific pool of 'blue chip' companies the same
stock appears to be slightly aggressive because the companies in the Dow Jones pool
are less riskier than those in the overall market and perform differently.

When using weekly observations vs monthly observations the value of betas for both
companies are smaller as they may introduce some irrelevant information, like
unchanged return on stock and/or the market portfolio. Nevertheless it increases
the size of the sample and thus , the reliability of the estimate.
Table 1
Company
Market Index
Walt
Disney Dow Jones
Company
S&P500
Unisys Corp.
S&P500
Beta
Monthly obs.
1.07
.85
2.38
Weekly obs.
1.02
.83
1.31
Dow Jones vs S&P 500
In the light of the results obtained previously, it seems that each of the two
companies come from a different population of companies more or less risky. In order to
assess whether these assumption is true the following test of means has been made :

Two samples each of 30 companies have been established :
-
one contains all the blue chips companies in the Dow Jones' pool
-
the second one contains other companies in the S&P 500 pool.
03/08/16
Page: 12
Eugene Bala

Influence of Beta on the Price of Equity and the Cost Capital
The null hypothethis : the companies in both samples come from the same
population.

Instead of doing a regression for each company in the samples, beta estimates
from the Bloomberg provider have been considered.

If the null hypothesis is correct then all these companies should respond more
or less in the same manner to the variations of the return on the market
portfolio.
As the SPSS output for a t-test for independent samples in Annexe 7 indicates,
the 2-Tail Sig < 0.05, thus the null hypothesis is rejected. In other words, the two
samples do not come from the same population. However, the 30 companies in the Dow
Jones pool have been taken out, without replacement, from the S&P 500 pool when the
second sample has been created picking all other company excepting a 'blue chips'.
03/08/16
Page: 13
Eugene Bala
Influence of Beta on the Price of Equity and the Cost Capital
Chapter 4
Implications for Managers
When using the CPAM model beta estimates directly influence the magnitude of
the company's cost of equity and indirectly, as indicated in the previous sections, the
cost of capital. Bigger the beta harder the company has to 'work' for the money that it
gets from investors and pay a premium for the risk that they have taken.
Firms recognise a certain ambiguity in any cost number and are willing to live
with approximation. Nevertheless it is critical for managers to understand what
underlies beta estimates and, as a result, use the most appropriate value that several
providers may offer.
In addition to relying on historical data, use of this equation (5) to estimate beta
requires a number of practical compromises, each of which can materially affect the
results.
1. Increasing the number of time periods used in the estimation may improve
the statistical reliability of the estimate but risks the inclusion of stale,
irrelevant information.
2. Shortening the observation period from monthly to weekly or daily increases
the size of the sample but may yield observations that are not normally
distributed and may introduce unwanted random noise.
3. Choice of the market index.
Beta providers use a variety of stock market indices as proxies for the market
portfolio on the argument that stock markets trade claims on a sufficiently
wide array of assets to be adequate surrogates for the unobservable market
portfolio.
Part of the Dow Jones index's appeal is its simplicity: it includes 30 of the biggest
corporate names on the planet, such as McDonalds's Corp., Walt Disney, IBM, Wal-Mart
Stores Inc., but they represent only 20 percent of US market's total value. A much
broader measure is the Standard $ Poors 500, whose stocks represent about 79 per
cent of the market value. Therefore it is better that the betas should be estimated taking
into account the S&P 500 indice as proxy for the return on the market portfolio. Also
managers must be aware of the impact that the time interval of observations have on
the value of beta, as indicated in table 1, and accordingly adjust it.
03/08/16
Page: 14
Eugene Bala
Influence of Beta on the Price of Equity and the Cost Capital
Annexes 1
SPSS Output for The Walt Disney Company
Monthly Observations - Dow
Mean Std Dev Label
DIS
1.544
7.346
DOWJM
1.520
4.047
N of Cases =
60
Variable(s) Entered on Step Number
1..
DOWJM
Multiple R
.59122
R Square
.34954
Adjusted R Square
Standard Error
.33832
5.97532
Analysis of Variance
DF
Sum of Squares
Regression
Residual
F=
Mean Square
1
1112.81831
1112.81831
58
2070.85798
35.70445
31.16750
Signif F = .0000
------------------ Variables in the Equation -----------------Variable
DOWJM
(Constant)
B
SE B
Beta
1.073218
.192237
-.086434
.824874
.591218
03/08/16
T
Sig T
5.583
.0000
-.105
.9169
Page: 15
Eugene Bala
Influence of Beta on the Price of Equity and the Cost Capital
Annexes 2
SPSS Output for The Walt Disney Company
Monthly Observations - S&P500
Mean Std Dev Label
DIS
1.544
7.346
SP500M
1.711
3.805
N of Cases =
60
Multiple R
.52951
R Square
.28038
Adjusted R Square
.26797
Standard Error
6.28495
Analysis of Variance
DF
Sum of Squares
Regression
Residual
F=
Mean Square
1
892.64334
892.64334
58
2291.03295
39.50057
22.59824
Signif F = .0000
------------------ Variables in the Equation -----------------Variable
B
SE B
SP500M
1.022262
.215043
(Constant)
-.204710
.890921
Beta
.529510
03/08/16
T
Sig T
4.754
.0000
-.230
.8191
Page: 16
Eugene Bala
Influence of Beta on the Price of Equity and the Cost Capital
Annexes 3
SPSS Output for The Walt Disney Company
Weekly Observations - Dow
Mean Std Dev Label
DIS
.389
4.352
DOWJW
.303
2.485
N of Cases = 104
Multiple R
.48747
R Square
.23762
Adjusted R Square
.23015
Standard Error
3.81816
Analysis of Variance
DF
Sum of Squares
Mean Square
Regression
1
463.47481
463.47481
Residual
102
1486.99241
14.57836
F=
31.79198
Signif F = .0000
------------------ Variables in the Equation -----------------Variable
B
SE B
DOWJW
.853764
.151419
(Constant)
.130378
.377204
Beta
.487465
T
Sig T
5.638 .0000
.346 .7303
03/08/16
Page: 17
Eugene Bala
Influence of Beta on the Price of Equity and the Cost Capital
Annexes 4
SPSS Output for The Walt Disney Company
Weekly Observations - S&P500
Mean Std Dev Label
DIS
.389
4.352
SP500W
.434
2.453
Multiple R
.46564
R Square
.21682
Adjusted R Square
.20915
Standard Error
3.86989
Analysis of Variance
DF
Regression
Residual
F=
Sum of Squares
1
422.90689
102
28.23882
Mean Square
422.90689
1527.56034
14.97608
Signif F = .0000
------------------ Variables in the Equation -----------------Variable
B
SE B
SP500W
.826095
.155456
(Constant)
.030570
.385427
Beta
.465643
T
Sig T
5.314 .0000
.079 .9369
03/08/16
Page: 18
Eugene Bala
Influence of Beta on the Price of Equity and the Cost Capital
Annexes 5
SPSS Output for The Unisys Corp.
Monthly Observations - S&P500
Mean Std Dev Label
UIS
2.640 16.021
SP500M
1.711
3.805
Multiple R
.56560
R Square
.31990
Adjusted R Square
.30818
Standard Error
13.32592
Analysis of Variance
DF
Sum of Squares
Regression
Residual
F=
Mean Square
1
4844.74897
4844.74897
58
10299.65243
177.58021
27.28203
Signif F = .0000
------------------ Variables in the Equation -----------------Variable
SP500M
(Constant)
B
SE B
2.381546
.455954
-1.435103
1.889012
Beta
.565600
03/08/16
T
Sig T
5.223
.0000
-.760
.4505
Page: 19
Eugene Bala
Influence of Beta on the Price of Equity and the Cost Capital
Annexes 6
SPSS Output for The Unisys Corp.
Weekly Observations - S&P500
Mean Std Dev Label
UIS
1.756
6.732
SP500W
.446
2.462
Multiple R
.48043
R Square
.23081
Adjusted R Square
.22320
Standard Error
5.93328
Analysis of Variance
DF
Regression
Residual
F=
Sum of Squares
Mean Square
1
1066.94360
1066.94360
101
3555.57954
35.20376
30.30766
Signif F = .0000
------------------ Variables in the Equation -----------------Variable
B
SE B
SP500W
1.313846
.238654
(Constant)
1.169138
.594247
Beta
.480431
T
Sig T
5.505 .0000
1.967 .0519
03/08/16
Page: 20
Eugene Bala
Influence of Beta on the Price of Equity and the Cost Capital
Annexes 7
SPSS Output for the Test of Means
t-tests for Independent Samples of INDEX
Number
Variable
of Cases
Mean
SD SE of Mean
----------------------------------------------------------------------BETA
INDEX 1
30
.9480
INDEX 2
30
1.2527
.315
.294
.058
.054
----------------------------------------------------------------------Mean Difference = -.3047
Levene's Test for Equality of Variances: F= .012 P= .912
t-test for Equality of Means
Variances t-value
df
2-Tail Sig
95%
SE of Diff
CI for Diff
------------------------------------------------------------------------------Equal
-3.87
58
.000
.079
(-.462, -.147)
Unequal
-3.87
57.72
.000
.079
(-.462, -.147)
-------------------------------------------------------------------------------
03/08/16
Page: 21
Eugene Bala
Influence of Beta on the Price of Equity and the Cost Capital
Annexe 8
betadjm.sav
Field
Description
month
sp500m
dowjm
mcd
dis
chv
xon
gm
genel
uk
intc
aap
dd
pg
ko
ip
wmt
utx
cat
s
ald
ek
goodyear
mrk
hwp
mmm
mo
jnj
c
t
axp
ba
jpm
Standard & Poors monthly
Dow Jones monthly
McDonald's Corporation
The Walt Disney Co.
Chevron Corp.
Exxon Corp.
General Motors Corp.
General Electric Co.
Union Carbide Corp.
Intel Business Machines Corp.
Alcoa Inc.
Du Pont de Nemours
Procter & Gamble Co.
Coca-Cola Co.
International Paper Co.
Wal-Mart Stores Inc.
United Technologies Corp.
Caterpillar Inc.
Sears, Roebuck $ Co.
Allied Signal Inc.
Eastman Kodak Co.
Goodyear Tire & Rubber Co.
Merck & Co., Inc.
Hewlett-Packard Co.
Minnesota Mining & MFG Co.
Philip Morris Companies Inc.
Johnson & Johnson
Citigroup Inc.
AT&T Corp.
American Express Co.
Boeing Co.
JP Morgan & Co.
03/08/16
Page: 22
Eugene Bala
Influence of Beta on the Price of Equity and the Cost Capital
Annexe 9
betadjw.sav
Field
Description
week
sp500m
dowjw
mcd
dis
chv
xon
gm
genel
uk
intc
aap
dd
pg
ko
ip
wmt
utx
cat
s
ald
ek
goodyear
mrk
hwp
mmm
mo
jnj
c
t
axp
ba
jpm
Standard & Poors weekly
Dow Jones weekly
McDonald's Corporation
The Walt Disney Co.
Chevron Corp.
Exxon Corp.
General Motors Corp.
General Electric Co.
Union Carbide Corp.
Intel Business Machines Corp.
Alcoa Inc.
Du Pont de Nemours
Procter & Gamble Co.
Coca-Cola Co.
International Paper Co.
Wal-Mart Stores Inc.
United Technologies Corp.
Caterpillar Inc.
Sears, Roebuck $ Co.
Allied Signal Inc.
Eastman Kodak Co.
Goodyear Tire & Rubber Co.
Merck & Co., Inc.
Hewlett-Packard Co.
Minnesota Mining & MFG Co.
Philip Morris Companies Inc.
Johnson & Johnson
Citigroup Inc.
AT&T Corp.
American Express Co.
Boeing Co.
JP Morgan & Co.
03/08/16
Page: 23
Eugene Bala
Influence of Beta on the Price of Equity and the Cost Capital
Annexe 10
betasp500m.sav
Field
month
sp500m
amr
ntrs
luv
mar
jcp
mas
fmy
hon
lnc
uis
bc
cs
cof
ccl
cd
ctx
cen
cha
cmb
cb
ci
csco
ccu
cl
jci
rnb
pkn
dg
ccr
see
Description
Standard & Poors monthly
AMR Corp.
Northern Trust
Southwest Air
Mariott Intl
JC Penney Co.
Masco Corp.
Fred Mayer Inc.
Honeywell Inc.
Lincoln Natl. Corp.
Unisys Corp.
Brunswick Corp.
Cabletron System
Cap One Finl.
Carnival Corp.
Cendant Corp.
Centex Corp.
Ceridian Corp.
Champion Intl.
Chase Manhattan Corp.
Chubb Corp.
Cigna Corp.
Cisco Systems.
Clear Channel
Colgate Palmolive
Johnson Controls
Republic NY Corp.
Perkin-Elmer
Dollar General
Countrywide Cred.
Sealed Air Corp.
03/08/16
Page: 24
Eugene Bala
Influence of Beta on the Price of Equity and the Cost Capital
Annexe 11
betasp500w.sav
Field
week
sp500m
amr
ntrs
luv
mar
jcp
mas
fmy
hon
lnc
uis
bc
cs
cof
ccl
cd
ctx
cen
cha
cmb
cb
ci
csco
ccu
cl
jci
rnb
pkn
dg
ccr
see
Description
Standard & Poors weekly
AMR Corp.
Northern Trust
Southwest Air
Mariott Intl
JC Penney Co.
Masco Corp.
Fred Mayer Inc.
Honeywell Inc.
Lincoln Natl. Corp.
Unisys Corp.
Brunswick Corp.
Cabletron System
Cap One Finl.
Carnival Corp.
Cendant Corp.
Centex Corp.
Ceridian Corp.
Champion Intl.
Chase Manhattan Corp.
Chubb Corp.
Cigna Corp.
Cisco Systems.
Clear Channel
Colgate Palmolive
Johnson Controls
Republic NY Corp.
Perkin-Elmer
Dollar General
Countrywide Cred.
Sealed Air Corp.
03/08/16
Page: 25
Eugene Bala
Influence of Beta on the Price of Equity and the Cost Capital
Annexe 11
Beta30.sav
Field
Description
Cny
Name of the company
Index
1- Dow Jones pool
2- S&P 500 pool
Beta
beta provided by Bloomberg
03/08/16
Page: 26
Eugene Bala
Influence of Beta on the Price of Equity and the Cost Capital
Annexe 12
References
R Giammarino
'Fundamentals of Corporate Finance'
R Bruner, K M Eades, R S Harris, R Higgins
'Best Practices in Estimating the Cost of Capital: Survey and Synthesis'
03/08/16
Page: 27