INTRODUCTION

Use BETA to graph and display the historical sensitivity of a selected equity
compared to a broad based market index. You can use BETA to help
determine an equity's risk level.

HOW TO
Use BETA
Once you choose an equity, then enter BETA <Go>, the BETA - Historical
Beta screen appears. Choose from the following options:
- To change the graph and data that appear on the screen, enter/choose the
appropriate information in/from the highlighted fields that appear, click on
the checkbox to the left of the appropriate formula(s) so that a checkmark
appears, then press <Go>. The Regression Analysis for BETA section of this
guide displays further information on the formula options that appear.
*Remember*
* You can choose any combination of formulas. If you choose more than one
formula, the 1) Details toolbar button appears, which allows you to display
the details that correspond to the selected formula(s).
* The regression equation appears in a legend on the graph.
- To display data about the company you are analyzing, move your cursor
over the appropriate point on the graph. A white box with corresponding
data appears.
*Remember*
* The data that appears is the date of the last observation for the selected
period, along with the percentage change for the selected period for the
security and index.
* The option you choose from the Currency field dropdown menu affects the
data that appears. The Country/Currency Codes section of this guide
displays further information.
Interpret the Graph
The scatter chart of the data points and the regression line appears. The
independent variable (index value) appears on the horizontal x-axis, and the
dependent variable (stock price) appears on the vertical y-axis. The
regression equation appears in a box at the bottom of the graph, next to a
color legend that corresponds to the data points and regression line.
The Beta + line appears for all values of X greater than 0, and the Beta
line appears for all values of X less than 0. The Beta+ and Beta- lines
should intersect the X = 0 lines at the same value of Y. The histogram along

the X-axis displays the distribution of observations along the X-axis, while
the histogram along the Y-axis displays the distribution of observations
along the Y-axis.

APPENDIX
GLOSSARY OF TERMS
Once you choose an equity and enter BETA <Go>, the Historical Beta screen
appears, where you can use specific analysis criteria to graph the historical
volatility of a selected equity compared to a broad based market index. A
table of corresponding data appears to the right of the graph. Depending on
the screen you choose, the following fields appear, listed here in
alphabetical order:
Adj BETA
Appears only when you choose the Linear option from the Formula field
dropdown menu. The adjusted beta, which is an estimate of a security's
future beta.
*Remember*
The adjusted beta is derived from historical data, but modified by the
assumption that a security's beta moves toward the market average over
time.
ALPHA (Intercept)
Appears only when you choose the Linear or Beta +/- option from the
Formula field dropdown menu. The point of intersection with the y-axis.
Avg. Slope
Appears only when you choose the Beta +/- option from the Formula field
dropdown menu. The average of Beta+ and Beta-.
BETA +/- Appears only when you choose the Beta +/- option from the Formula field
dropdown menu.
- The formula that determines Beta in the up and down market. The
Regression Analysis for Beta section of this guide displays further
information.
Convexity
Appears only when you choose the Beta +/- option from the Formula field
dropdown menu. Half of the difference of Beta+ less Beta-.
Currency (label does not appear)

The currency in which the data appears. The dropdown menu displays a list
of options. The Country/Currency Codes section of this guide displays
further information.
Data
The price type. The dropdown menu displays a list of options.
Date Range (label does note appear)
The date range of the analysis.
Note:
- If the firm has long-term debt on its balance sheet for the specified date
range, the beta is
considered leveraged. There is no adjustment to the beta calculation based
on this assumption.
- To determine if a firm has long-term debt on its balance sheet, enter (ticker
symbol) (exchange code) <EQUITY> FA <GO>. FA <HELP> displays further
information.
Details
Appears only when you choose more than one formula. Allows you to
display the details that correspond to the formula(s).
Formula
The formula used to calculate beta. The dropdown menu displays a list of
options. The Calculations section of this guide displays further information.
Linear
The formula that depicts the historical return of two assets. The Regression
Analysis for Beta section of this guide displays further information.
Non-Parametric
The formula that pieces together weighted BETA slices. The Regression
Analysis for Beta section of this guide displays further information.
Number of Non-Parametric Slices
Appears only when you choose the Non-Parametric option from the Formula
field dropdown menu. The number of slices that constitute the mid line.
Number of Points
The number of data points used to calculate the beta.
*Remember*

- The number of points is the number of deltas for period samples in the
date range. The maximum number of period samples is 2400, so the
maximum number of deltas is 2399.
- The greater number of points used in the calculation, the more accurate
the results are.
Period (lable does not appear)
The frequency of the data used to calculate the beta and construct the
graph. The dropdown menu displays a list of options.
R2 (Correlation^2)
The coefficient of determination (R Squared), which is a statistical term
describing the fraction of variance in the dependent variable that can be
explained by the independent or explanatory variable.
*Remember*
The coefficient of determination is the square of a correlation between X and
Y and is a number ranging from 0.0 to 1.0.
Raw BETA
Appears only when you choose the Linear option from the Formula field
dropdown menu. The sensitivity measure that estimates the percentage
price change of a security given a 1% change in a representative market
index.
*Remember*
- The Raw Beta measures the risk of a security relative to the market. A
beta greater than 1.0 indicates that the security is riskier and more volatile
than the broad market. For example, a beta of 1.1 indicates a 1.1%
movement in the security for a 1.0% movement in the index, regardless of
direction. A beta less than 1.0 indicates that the security is less risky than
the market. For example, a beta of 0.8 indicates a 0.8% movement in the
security for a 1% movement in the index.
- A beta greater than 1.0 indicates that the security is more volatile and
riskier than the broad market. For example, a beta of 1.1 indicates a 1.1%
movement in the security for a 1.0% movement in the index, regardless of
direction. For example, a beta of 1.1 indicates a 1.1% movement in the
security for a 1.0% movement in the index, regardless of direction.
Relative Index
The ticker symbol of the index used to calculate the beta.
Note: You can choose any index that has a price history.

Security (label does not appear)

The ticker symbol, exchange code, and yellow key for the security you are
analyzing.
Slice Size
Appears only when you choose the Non-Parmetric option from the Formula
field dropdown menu. The delta of X for the mid line.
Std Dev Bandwidth
Appears only when you choose the Non-Parametric option from the Formula
field dropdown menu. The Standard Deviation of the Gaussian, which is
used to calculate the local average.
Std Dev of Error
Appears only when you choose the Linear or Beta +/- option from the
Formula field dropdown menu. The measure of the degree to which an
individual value varies from the distribution mean.
*Remember*
The predicted value of Y (in the equation for the regression line) is within
plus or minus the standard deviation of error of the actual value. For
example, if the standard deviation of error is 6.59 and Y = 21.43, then 68%
of the time Y is within 21.43 +/- 6.59, or 28.02 to 14.84.
Std Error of ALPHA
Appears only when you choose the Linear or BETA +/- option from the
Formula field dropdown menu. The 68% confidence level, or one standard
deviation, that the Actual Alpha = Alpha +/- the standard error. For
example, if alpha is 1.0 and the standard error of alpha is 0.25, then alpha is
between 0.75 and 1.25 with a 68% confidence level.
Std Error of BETA
Appears only when you choose the Linear option from the Formular field
dropdown menu. The 68% confidence level (or one standard deviation) that
the Actual Beta = Raw Beta +/- the standard error. For example, if raw beta
is 1.0 and the standard error of beta is 0.25, then it can be said that beta is
between 0.75 and 1.25 with a 68% confidence level.
Std Error of BETA (+/-)
Appears only when you choose the Beta +/- option from the Formula field
dropdown menu. The 68% confidence level (or one standard deviation) that
the Actual Beta = Raw Beta +/- the standard error. For example, if raw beta
is 1.0 and the standard error of beta is 0.25, then beta is between 0.75 and
1.25 with a 68% confidence level.

SHORTCUTS

(ticker symbol) (exchange code) <EQUITY> BETA (period code) <Go>

Specify the period. Period codes include (D) daily, (W) weekly, (M) monthly,
(Q) quarterly, and (Y)
yearly.

RELATED INFORMATION
Country/Currency Codes
Formulas for Regression Analysis
BETA Overrides
BETA, HRA, and CORR Calculation FAQs
Sample Calculation Sheet for BETA and CORR