Also, professional beta services use monthly data over a five year period. Now, calculate monthly holding period returns using the prices and dividends. Here r denotes return, p denotes price, and d denotes dividend. The following table of monthly data may help in visualizing the process. Date Price Div.
Dividend refers to the dividend paid during the period.
They are assumed to be paid on the date. The slope of the line is Beta. A lot of disservice has been done to Beta in the popular press because of trying to simplify the concept. A beta of 1.5 does not mean that is the market goes up by 10 points, the stock will go up by 15 points. Technically speaking, alpha is the intercept in the estimation model.