Computation of beta value

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Reference no: EM1316726

Computation of Beta Value

The returns from the past 13 quarters on Mercantile Bank Corporation and the market are listed below.

Mercantile	Market
-0.009	0.023
0.051	0.058
-0.001	-0.02
-0.045	-0.05
0.085	0.071
0	0.012
-0.08	-0.075
0.02	0.05
0.125	0.12
0.11	0.049
-0.1	-0.03
0.04	0.028

The covariance of Mercantile Bank Corporation's return with the market's return is 0.038711.

The market variance is 0.038588.The expected returns on Mercantile and the market are 0.016333 and 0.019667, respectively.

What is the beta of Mercantile Bank Corporation stock?

Is Mercantile's beta higher or lower than the beta of the average stock?

Note: To compute the beta of Mercantile's stock, divide the covariance of the stock's return with the market's return by the market variance

Reference no: EM1316726

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