Single stock Beta calculation?

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Single stock Beta calculation?

posted Jan 22, 2016

Seeking Help Research

I've been tring to get an accurate stock beta calculation and am currently stuck. Based on what Dan posted last year, "We are computing your beta to SPY over a trailing 1-year period at the end of each month for a year, and then averaging those results. In practice, that means computing your beta to SPY for the year previous to April 30, 2015, for the year previous to March 31, 2015, for the year previous to February 28, 2015, etc. until we have 12 computations, and then averaging them.", what I've done so far is taking the price from 25, 24, [...] and 12 months ago, then the price from 24, 23, [...] and 11 months ago, and so on, 12 times and putting these 12 results' average in the Wikipedia beta formula (COV/VAR).

The results I get seem to make sense but when I use a backest to buy 1 random share and then print that ticker's beta, according to my calculations, the numbers don't match (at all!).

Can anyone help me figure this one out?

Aitor

1 response

Jamie McCorriston

Hi Aitor,

Would you be willing to share a backtest so I can take a look at the code?

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The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by Quantopian.

In addition, the material offers no opinion with respect to the suitability of any security or specific investment. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as none of Quantopian nor any of its affiliates is undertaking to provide investment advice, act as an adviser to any plan or entity subject to the Employee Retirement Income Security Act of 1974, as amended, individual retirement account or individual retirement annuity, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement or other investor, contact your financial advisor or other fiduciary unrelated to Quantopian about whether any given investment idea, strategy, product or service described herein may be appropriate for your circumstances. All investments involve risk, including loss of principal. Quantopian makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances.