Calculating a Portfolio's Beta
Journal of Economics and Finance Education, Forthcoming
11 Pages Posted: 2 Oct 2017
Date Written: September 25, 2017
We present an active-learning computer exercise where students pick stocks for a portfolio. Using their selection of stocks, two different portfolios are created: 1) a portfolio that never rebalances and 2) a portfolio that continuously rebalances. They then calculate the rates of return and betas for their individual stocks and for their portfolios. The students are then asked to draw conclusions about the benefits of diversification which are shown to apply regardless of the specific type of rebalancing in a diversified portfolio.
Keywords: Portfolio, CAPM, Beta
JEL Classification: G10, G12
Suggested Citation: Suggested Citation