When evaluating the different options for finding beta, you may be wondering: Which one is right?
There is no right answer and there are several different methods to calculate beta. You must be aware of how the different resources calculate beta and decide which one is right for you.
The following list highlights some of the major differences:
- Index Used:
- Bloomberg and CapitalIQ use the S&P 500 Index as the independent variable.
- Time Frame:
- The default setting for Bloomberg sets the time frame for the data to two years, but can be changed to a desired range.
- Calculation Method:
- Bloomberg and FactSet perform a regression on the weekly prices for the stock and the index in a similar way that Excel would.
- Historical Beta vs. Fundamental Beta:
- When looking for a historical beta of a stock, you can use Bloomberg,CapIQ, or WRDS. In Bloomberg, you would change the specified date range, however you may not be able to go as far back as you desire.
- To find the fundamental or predicted beta for a stock, use Bloomberg to create a portfolio of companies (PRTU) and then run PORT to get the predicted beta in the Tracking Error display tab.
