Yahoo Finance Equity Beta Uses Monthly Prices Over Three Years
Summary
The document explains why a beta estimated from five years of daily stock and benchmark prices may not match Yahoo Finance’s published value. A reply citing Yahoo’s help material says the displayed measure is equity beta, calculated from monthly price changes relative to the S&P 500, using a three-year period when available. Another answer gives a more specific reconstruction: use 37 monthly closing prices to form 36 returns, with prices taken on each month’s first trading day.
That reconstruction specifies unadjusted closing prices rather than adjusted closes and recommends calculating beta as the slope of stock returns against benchmark returns. A separate reply notes that beta practices vary and that monthly or weekly sampling is common. The discussion helps identify plausible inputs behind Yahoo’s figure, but it does not provide a universally applicable specification for dates, missing observations, or data revisions. The cited method is platform-specific, and the initial question’s different estimate illustrates how sampling frequency and lookback can change beta.
Key ideas
- Yahoo’s beta is described as equity beta relative to the S&P 500.\nThe cited Yahoo method uses monthly price changes over three years when data are available.\nA reconstruction uses 37 first-trading-day monthly closes to calculate 36 monthly returns.\nThe reconstruction specifies closing prices rather than adjusted closing prices.\nBeta can be calculated as the slope of stock returns against benchmark returns, and results depend on sampling choices.
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Full text
# How does Yahoo finance calculate Beta? # How does Yahoo finance calculate Beta? I am trying to replicate the beta value that yahoo calculates but I am getting different results. According to Yahoo, its beta is calculated using 5 year returns against the SP500: yahoo beta I assume that daily values are used though it is not stated. I downloaded historical prices for MSFT from Dec 2009 to Dec 2014 and replicated this calculation, using: $$\beta = cov(MSFT, SP500)/var(SP500)$$ I obtain a result of about 0.89 whereas Yahoo quotes a beta of 0.69. Using a 3 year horizon, I am getting 0.96 which is very close to the Beta quoted by Google (0.98). So, I think Google uses something like a 3 year horizon (though I don't know the exact dates) but Yahoo is completely off. Does anyone knows how it is calculated? ## Answer by chjortlund (score 12) https://quant.stackexchange.com/a/15825 From Yahoo! Finance Help > The Beta used is Beta of Equity. Beta is the monthly price change of a particular company relative to the monthly price change of the S&P500. The time period for Beta is 3 years (36 months) when available. Source: https://help.yahoo.com/kb/finance/SLN2347.html?impressions=true (+Stock Price History) ## Answer by Sim Con (score 5) https://quant.stackexchange.com/a/17919 Yahoo Finance calculates beta from monthly prices over a time of three years. The S&P500 is used as the benchmark You need 37 monthly prices (so you can get 36 returns) on the first trading day of each month. - The final price should be on the first trading day of the previous month. - The first price should be on the first trading day of the month 36 months prior to the previous month. - These are closing prices (not the adjusted close) You then calculate the monthly returns for your stock and benchmark. You can then calculate beta using Excel (for example, using the slope function). e.g. =SLOPE(range of stock returns, range of benchmark returns) Source: This website contains more detail, and has reproduced the beta given by Yahoo Finance for a specific stock. ## Answer by clocker (score 3) https://quant.stackexchange.com/a/15817 Beta calculation varies quite a bit as you've already noted. Using monthly or weekly closing prices is fairly common though; I don't know of anyone who uses daily prices. Yahoo gets its data from CapitalIQ so you may want to look over there. Good luck!
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