Beta (KO vs. S&P 500 Index)

We have discussed the idea of beta and systematic risk a great deal in class thus far. So I decided to put together an example of this using a certain stock and see if I could analyze a bit about the firm and its beta value.

I decided to go with the stock KO (Coca Cola) and using Yahoo Finance was able to find historical returns of the stock over a period of time. I chose to go with September 1, 2008-February 28, 2009 (since this is the most recent 6 month period). I first found the information on a weekly basis for the adjusted closing prices. I did the same with the S&P 500 Index to use this as my comparison for the market values. I found the % change in the closing price for each of the stocks for each week. Below is the Excel sheet I created:




I then put the S&P 500 data vs. the KO data on a scatter plot to try to see the correlation between the stock and the market during this current time period. Below is the scatter plot that I created. I also inserted a trendline to further show this correlation. Excel came up with the equation y=0.6777x + 0.0054 for the line.

From looking at the graph, it shows the equation for the trendline, and since beta is the slope of the line that means the beta for KO for this time period is .6777. Because KO’s beta is less than one, KO is seen to be less volatile than the market (S&P 500).

I also did the above process on a monthly basis for the same time period to see if the results would come out the same or similar for less data points. For that one the equation turned out to be y=0.7568x + 0.0196. So the beta appeared to be larger since it didn't have as many data points to see all the fluctuations that had occurred over the specified time period.

Overall, I think this was a very interesting process to go through. I compared my results to the beta listed on the Yahoo Finance website for KO, and they list beta as .61, so it appears that the beta is pretty close to that in the recent 6 month period. I suppose I thought this was just an interesting thing to see right now given all the unusual circumstances of the market and the US economy as a whole. It was really interesting to be able to work through this and see where that beta value comes from, since it is something we've been discussing in class so much this semester.


Yahoo Finance KO


Yahoo Finance S&P 500 Index